After reading this chapter, students should be able to:

1. Discuss the internationalization of business.
2. Explain why foreign exchange rates in two different countries must be in line with each other.
3. Discuss the concept of interest-rate parity.
4. Explain the purchasing-power parity theory and the law of one price.
5. Explain what exchange rate risk is and how it can be controlled.
6. Identify working-capital management techniques that are useful for international businesses to reduce exchange rate risk and potentially increase profits.
7. Explain how the financing sources available to multinational corporations differ from those available to domestic firms.
8. Discuss the risks involved in direct foreign investment.