Firms usually hire HCNs abroad to maintain local control over ...

[Yolanda]

Firms usually hire HCNs abroad to maintain local control over foreign operations.
 
  Indicate whether the statement is true or false

Question 2

Explain the differences between equity financing and debt financing, and discuss the ways international firms obtain equity financing or debt financing.
 
  What will be an ideal response?

[mammy1697]

Answer to Question 1

FALSE

Answer to Question 2

Companies obtain capital in two basic ways: by borrowing it or by selling shares of ownership in the firm. Equity financing is selling shares of stock to investors, which provides them with an ownership interest-that is, equity-in the firm. The firm can also retain earnings-that is, reinvest profit rather than paying it out as dividends to investors. In new companies, founders often provide equity financing from their personal savings. Debt financing comes from either of two sources: loans from banks and other financial intermediaries or the sale of corporate bonds to individuals or institutions.
Firms obtain these sources of funding as follows. In equity financing, the firm obtains capital by selling stock, which gives shareholders a percentage of ownership in the firm and, often, a stream of dividend payments. The main advantage is that the firm obtains capital without debt. However, whenever new equity is sold, the firm's ownership is diluted. Management also risks losing control in the event one or more shareholders acquire a controlling interest. Internationally, firms obtain equity financing in the global equity market-stock exchanges worldwide where investors and firms meet to buy and sell shares of stock.
In debt financing, a firm borrows money from a creditor (or sells bonds) in exchange for repayment of principal and an agreed-upon interest amount in the future. The main advantage is that the firm does not sacrifice any ownership to obtain needed capital.