Most often, multinational corporations engage in financial leverage to fund major production activities. A multinational's capital structure is important for multinational corporations because it allows corporations to finance multinational operations, expand productions, or purchase assets (DeBenedetti, 2024). Equity and debts make up multinational capital structure. When developing international capital structure, multinational corporations must strongly consider the cost of raising capital because the cost of capital is an important component of financing decisions.

The component of debt in international capital structure is important because the cost of debt is often less than other forms of financing (DeBenedetti, 2024). Equity financing is also important in financing multinational corporations because it becomes the only option for financing operations when the firm is highly leveraged.

One goal of cash management in a multinational corporation is the movement of cash from a foreign country bank to a domestic bank of the parent company. One risk that multinational corporations face in cash management is political risk, because most foreign governments often place restrictions on transfers of funds out of their country. Credit management deals with the connection between suppliers (account receivable) and the buyers (account payable).

Credit management risk between domestic suppliers that supply to foreign customers is exchange rate. The suppliers' account receivable may be impacted if the exchange rate falls between the countries' currencies. Taxes impose risk on inventory management at multinational firms. According to Brigham & Ehrhardt (2020), countries often impose property taxes on assets, including inventory. Holding large inventories in a foreign country has the potential of increasing taxes on multinational corporations. Exchange rates are the main risks multinational corporations must consider when discussing strategies for financing foreign operations.

Personal debt is an obligation for an individual; the debt must be repaid to the debtholder. The Christian perspective is that paying off debt makes a personal an honest and credible individual. In the case of financial leverage of multinational corporations, repaying debt makes the corporations more trustworthy for business transactions. Roman 13:8 said, "Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law" (NIV). Paying our debt as individuals or corporations make us to be trustworthy to the world.

Reference,

DeBenedetti, J. (2024). The capital structure for a multinational corporation. https://smallbusiness.chron.com/capital-structure-multinational-corporation-81741.html

Brigham, E, F., Ehrhardt, M, C. (2020). MindTap for Financial Management: Theory and Practice (16th Ed.). Cengage Learning.

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