As the vice president of finance for a company producing and selling electronic
ID: 2655606 • Letter: A
Question
As the vice president of finance for a company producing and selling electronic switchboards, you are considering foreign investment to build a plant to assemble electronic components. A source in Russia advises you that a town near Moscow may be an excellent location for a new plant. Russians are well educated and willing to work for reasonable wages. Projected construction costs are acceptable. Both rail lines and airports are nearby, and the current Russian government seems politically stable. The town even has a technical college that will be an excellent source for skilled employees. The plant will ship most of the finished electronic components back to the United States.
Do you know everything you need to make an investment decision?
If not, what else do you need to know about investment in foreign countries?
What does it mean to say that law is the foundation of the private enterprise system?
Explanation / Answer
Ans:
The available information talks about the availability of human resources and logistic facilities in the Russian Town. But that information is not sufficient to take a decision regarding foreign investment.
The following other information are needed for taking a final decision;
The foreign investment rules and conditions in Russia.
The rules for incorporation of a company in Russia.
Shareholding patterns allowed for a foreign parent in Russian company.
Any capital investment restrictions in place.
The import and export rules in Russia.
Any limit on export percentage of total turnover is there? Or the full production can be exported?
Labour laws in place in Russia.
Rules for dividend payment to foreign parent.
Prevailing cost of capital for borrowing in Russia.
Borrowing rules from parent company in Russia.
Rules regarding employment of expats in senior roles in Russian company.
Ans 2:
The statement that law is the foundation of private enterprise system is very true. Law gives tha sanctity and validity to private enterprises for operating in a country. As there is law to protect the investors, the private enterprises can raise capital from public . The creditors supply goods and services to private enterprises as there is law to protect creditors interest. Similarly Banks provides working capitals or long term loans to private enterprises as there is available laws to protect the banks.
Similarly laws also protect private enterprises from any unfair treatment.
Therefore, law is the foundation that guarantees justice , fairness and provides security to all stakeholders in the economy who are involved in the operation of private enterprises.
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