Foreign Investment


 
 
Concept Explanation
 

Foreign Investment

Foreign investment means an investment into production or business in a country by an individual or company in another country for profit earning. Typically, foreign investment denotes that foreigners take a some what active role in management as a part of their investment. Foreign investment typically works both ways, especially between countries of relatively equal economic status.

Foreign investment on the basis of nature can be categorized into two types

Foreign Direct Investment (FDI)

It refers to direct investment in the productive capacities of a country by someone from outside the country.

  • Broadly, foreign direct investment includes mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intra company loans". In a narrow sense, foreign direct investment refers just to building new facilities.
  • It refers to direct investment in the productive capacities of a country by someone from outside the country. Such an investment can be in the form of setting up of a new plant or through purchase of shares of a company, where the shareholding gives the foreign entity control over the business of the company.
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