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Foreign direct investment (FDI)

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Definition of Foreign direct investment (FDI)

Foreign Direct Investment (FDI) Image 1

Foreign direct investment (FDI)

The acquisition abroad of physical assets such as plant and equipment, with
operating control residing in the parent corporation.



Related Terms:

Business Expansion Investment

The use of capital to create more money through the addition of fixed assets or through income producing vehicles.


capital investment analysis

Refers to various techniques and procedures
used to determine or to analyze future returns from an investment
of capital in order to evaluate the capital recovery pattern and the
periodic earnings from the investment. The two basic tools for capital
investment analysis are (1) spreadsheet models (which I strongly prefer)
and (2) mathematical equations for calculating the present value or
internal rate of return of an investment. Mathematical methods suffer
from a lack of information that the decision maker ought to consider. A
spreadsheet model supplies all the needed information and has other
advantages as well.


Capital Investments

Money used to purchase fixed assets for a business, such as land, buildings, or machinery. Also, money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses.


Controlled foreign corporation (CFC)

A foreign corporation whose voting stock is more than 50% owned
by U.S. stockholders, each of whom owns at least 10% of the voting power.


direct cost

a cost that is distinctly traceable to a particular cost object



Direct cost

A cost that can be clearly associated with specific activities or products.


direct costing

see variable costing


Foreign Direct Investment (FDI) Image 2

Direct costing

A costing methodology that only assigns direct labor and material costs
to a product, and which does not include any allocated indirect costs (which are all
charged off to the current period).


Direct costs

Costs that are readily traceable to particular products or services.


Direct Deposit

The direct transfer of payroll funds from the company bank account
directly into that of the employee, avoiding the use of a paycheck.


direct deposit

A system where funds are electronically credited to your account by a financial institution or a payroll service. For example, you can arrange with your employer to have your pay cheques automatically deposited into your no fee bank account.


Direct estimate method

A method of cash budgeting based on detailed estimates of cash receipts and cash
disbursements category by category.


direct labor

the time spent by individuals who work specifically
on manufacturing a product or performing a service;
the cost of such time


Direct labor

Labor that is specifically incurred to create a product.


Direct lease

Lease in which the lessor purchases new equipment from the manufacturer and leases it to the
lessee.


direct material

a readily identifiable part of a product; the cost of such a part


Foreign Direct Investment (FDI) Image 3

Direct materials cost

The cost of all materials used in a cost object, such as finished goods.


Direct materials mix variance

The variance between the budgeted and actual mixes of
direct materials costs, both using the actual total quantity used. This variance isolates
the unit cost of each item, excluding all other variables.



Direct method

A method of preparing the operating section of the Statement of Cash Flows that uses the company’s actual cash inflows and cash outflows.


direct method

a service department cost allocation approach
that assigns service department costs directly to revenueproducing
areas with only one set of intermediate cost
pools or allocations


Direct-Method Format

A format for the operating section of the cash-flow statement that reports actual cash receipts and cash disbursements from operating activities.


Direct paper

Commercial paper sold directly by the issuer to investors.


Direct placement

Selling a new issue not by offering it for sale publicly, but by placing it with one of several
institutional investors.


Direct quote

For foreign exchange, the number of U.S. dollars needed to buy one unit of a foreign currency.


Direct-Response Advertising

Advertising designed to elicit sales to customers who can be
shown to have responded specifically to the advertising in the past. Such costs can be capitalized
when persuasive historical evidence permits formulation of a reliable estimate of the future revenue
that can be obtained from incremental advertising expenditures.


Direct search market

Buyers and sellers seek each other directly and transact directly.


Direct stock-purchase programs

The purchase by investors of securities directly from the issuer.


Foreign Direct Investment (FDI) Image 4

Direct write-off method

A method of adjusting accounts receivable to the amount that is expected to be collected by eliminating the account balances of specific nonpaying customers.



Director

A member of a company’s Board of directors.


Dividend reinvestment plan (DRP)

Automatic reinvestment of shareholder dividends in more shares of a
company's stock, often without commissions. Some plans provide for the purchase of additional shares at a
discount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the Long
term using dollar cost averaging. The DRP is usually administered by the company without charges to the
holder.


Equity investment

Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.


Expected return on investment

The return one can expect to earn on an investment. See: capital asset
pricing model.


FDIC

Federal Deposit Insurance Corporation.


Federal Deposit Insurance Corporation (FDIC)

A federal institution that insures bank deposits.


Foreign banking market

That portion of domestic bank loans supplied to foreigners for use abroad.


Foreign bond

A bond issued on the domestic capital market of anther company.


Foreign bond market

That portion of the domestic bond market that represents issues floated by foreign
companies to governments.


Foreign Corrupt Practices Act (FCPA)

a law passed by U.S. Congress in 1977 that makes it illegal for a U.S. company to engage in various “questionable” foreign payments and
makes it mandatory for a U.S. company to maintain accurate
accounting records and a reasonable system of internal
control


Foreign currency

foreign money.


Foreign currency option

An option that conveys the right to buy or sell a specified amount of foreign
currency at a specified price within a specified time period.


Foreign currency translation

The process of restating foreign currency accounts of subsidiaries into the
reporting currency of the parent company in order to prepare consolidated financial statements.


Foreign equity market

That portion of the domestic equity market that represents issues floated by foreign companies.


Foreign exchange

Currency from another country.


Foreign Exchange

The currency of a foreign country.


Foreign exchange controls

Various forms of controls imposed by a government on the purchase/sale of
foreign currencies by residents or on the purchase/sale of local currency by nonresidents.


Foreign exchange dealer

A firm or individual that buys foreign exchange from one party and then sells it to
another party. The dealer makes the difference between the buying and selling prices, or spread.


Foreign Exchange Market

A worldwide market in which one country's currency is bought or sold in exchange for another country's currency.


Foreign Exchange Reserves

A fund containing the central bank's holdings of foreign currency or claims thereon.


Foreign exchange risk

The risk that a long or short position in a foreign currency might have to be closed out
at a loss due to an adverse movement in the currency rates.


Foreign exchange swap

An agreement to exchange stipulated amounts of one currency for another currency
at one or more future dates.


Foreign market

Part of a nation's internal market, representing the mechanisms for issuing and trading
securities of entities domiciled outside that nation. Compare external market and domestic market.


Foreign market beta

A measure of foreign market risk that is derived from the capital asset pricing model.


Foreign Sales Corporation (FSC)

A special type of corporation created by the Tax Reform Act of 1984 that
is designed to provide a tax incentive for exporting U.S.-produced goods.


Foreign tax credit

Home country credit against domestic income tax for foreign taxes paid on foreign
derived earnings.


Future investment opportunities

The options to identify additional, more valuable investment opportunities
in the future that result from a current opportunity or operation.


guaranteed investment certificate (GIC)

A GIC is an investment that gives you a guaranteed rate of return over a fixed period of time, usually between 30 days and 5 years. GICs are available from banks, trust companies, and other financial institutions.


Guaranteed investment contract (GIC)

A pure investment product in which a life company agrees, for a
single premium, to pay the principal amount of a predetermined annual crediting (interest) rate over the life of
the investment, all of which is paid at the maturity date.


indirect cost

a cost that cannot be traced explicitly to a particular
cost object; a common cost


Indirect cost

A cost that is not directly associated with a single activity or event. Such
costs are frequently clumped into an overhead pool and allocated to various activities,
based on an allocation method that has a perceived or actual linkage between
the indirect cost and the activity.


Indirect costs

Costs that are necessary to produce a product/service but are not readily traceable to particular products or services – see overhead.


Indirect labor

The cost of any labor that supports the production process, but which is
not directly involved in the active conversion of materials into finished products.


Indirect method

A method of preparing the operating section of the Statement of Cash Flows that does not use the company’s actual cash inflows and cash outflows, but instead arrives at the net cash flow by taking net income and adjusting it for noncash expenses and the changes from last year in the current assets and current liabilities.


Indirect-Method Format

A format for the operating section of the cash-flow statement that
presents the derivation of cash flow provided by operating activities. The format starts with net
income and adjusts for all nonoperating items and all noncash expenses and changes in working capital accounts.


Indirect quote

For foreign exchange, the number of units of a foreign currency needed to buy one U.S.$.


Indirect Taxes

Taxes paid by consumers when they buy goods and services. A sales tax is an example.


Interac® Direct Payment

Instead of paying with cash or a credit card, Interac direct Payment allows you to pay for your purchase with a debit card, such as your bank card. The amount of the purchase is electronically debited, or withdrawn, from your bank account (see debit card).
Here's how to pay for items using Interac direct Payment and your bank account:
1. Swipe your bank card (or debit card) through the point of sale (POS) terminal at the store's check-out
2. Enter your personal identification number (PIN), confirm the amount to be paid and indicate the account (chequing) from which the money is to be drawn.
3. The specified amount is then electronically debited from your account.


Investment

The commitment of funds (capital) in anticipation of an increased
return of funds at some point in the future


Investment analysts

Related: financial analysts


Investment bank

Financial intermediaries who perform a variety of services, including aiding in the sale of
securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and
institutional clients, and trading for their own accounts. Underwriters.


Investment Banker

Middleman between a corporation issuing new securities and the public. The middleman buys the securities issue outright and then resells it to customers. Also called an underwriter.


investment center

a responsibility center in which the manager
is responsible for generating revenues and planning
and controlling expenses and has the authority to acquire,
dispose of, and use plant assets to earn the highest rate
of return feasible on those assets within the confines and
to the support of the organization’s goals


Investment centre

A division or unit of an organization that is responsible for achieving an adequate return on
the capital invested in the division or unit.


investment decision

a judgment about which assets will be
acquired by an entity to achieve its stated objectives


Investment decisions

Decisions concerning the asset side of a firm's balance sheet, such as the decision to
offer a new product.


investment grade

Bonds rated Baa or above by Moody’s or BBB or above by Standard & Poor’s.


Investment grade bonds

A bond that is assigned a rating in the top four categories by commercial credit
rating companies. For example, S&P classifies investment grade bonds as BBB or higher, and Moodys'
classifies investment grade bonds as Ba or higher. Related: High-yield bond.


Investment income

The revenue from a portfolio of invested assets.
investment management Also called portfolio management and money management, the process of
managing money.


Investment manager

Also called a portfolio manager and money manager, the individual who manages a
portfolio of investments.


Investment product line (IPML)

The line of required returns for investment projects as a function of beta
(nondiversifiable risk).


Investment Spending

Expenditures on capital goods including new housing. Financial ''investments" and sales of existing assets are not included.


Investment tax credit

Proportion of new capital investment that can be used to reduce a company's tax bill
(abolished in 1986).


Investment Tax Credit

A reduction in taxes offered to firms to induce them to increase investment spending.


Investment trust

A closed-end fund regulated by the investment Company Act of 1940. These funds have a
fixed number of shares which are traded on the secondary markets similarly to corporate stocks. The market
price may exceed the net asset value per share, in which case it is considered at a "premium." When the
market price falls below the NAV/share, it is at a "discount." Many closed-end funds are of a specialized
nature, with the portfolio representing a particular industry, country, etc. These funds are usually listed on US
and foreign exchanges.


Investment value

Related:straight value.


Investments

As a discipline, the study of financial securities, such as stocks and bonds, from the investor's
viewpoint. This area deals with the firm's financing decision, but from the other side of the transaction.


Legal investments

investments that a regulated entity is permitted to make under the rules and regulations
that govern its investing.


Mutually exclusive investment decisions

investment decisions in which the acceptance of a project
precludes the acceptance of one or more alternative projects.


Net investment

Gross, or total, investment minus depreciation.


Net Investment

investment spending minus depreciation.


Net present value of future investments

The present value of the total sum of NPVs expected to result from
all of the firm's future investments.


Passive investment management

Buying a well-diversified portfolio to represent a broad-based market
index without attempting to search out mispriced securities.


Passive investment strategy

See: passive management.


postinvestment audit

the process of gathering information
on the actual results of a capital project and comparing
them to the expected results


pre-authorized direct deposit

A system where funds are electronically credited to your account by a financial institution or a payroll service.


qualified investments (Canada)

Qualified investments is the term used for investments that can be held in an RSP. These investments generally include:
Canadian dollar savings accounts, guaranteed investment certificates, term deposits
shares of Canadian and foreign companies listed on a prescribed stock exchange
shares of some over-the-counter U.S. and Canadian companies
shares of some small businesses
certain types of bonds and money-market investments such as treasury bills, Canada Savings Bonds, Government of Canada bonds, provincial government bonds, Crown Corporation bonds, bonds issued by Canadian corporations listed on a prescribed stock exchange, and certain strip bonds
certain types of mortgages, including your own
certain covered call options, warrants and rights
certain mutual funds


Regular Investment Plan (RIP)

A plan under which you may make regular deposits of the same amount to your Mutual Funds account once a month, once every 2 weeks, or once a week. You can also make regular deposits up to four times a month on any dates you choose.


reinvestment assumption

an assumption made about the rates of return that will be earned by intermediate cash flows from a capital project; NPV and PI assume reinvestment at the discount rate; IRR assumes reinvestment at the IRR


Reinvestment rate

The rate at which an investor assumes interest payments made on a debt security can be
reinvested over the life of that security.


Reinvestment risk

The risk that proceeds received in the future will have to be reinvested at a lower potential
interest rate.



 

 

 

 

 

 

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