Abstract/Summary

This teaching article, which is intended for international business educators and students enrolled in undergraduate or pre-experience postgraduate courses, presents three propositions. First, international financial management of the multinational enterprise (MNE) is important in international business education. Second, theoretical concepts and frameworks need to be made relevant to the learning experiences of students by analysing the real-world practices of MNEs and their foreign subsidiaries. Third, both rigour and relevance must be well-integrated. We apply this teaching and learning approach by examining the role of internal capital markets within the MNE’s organizational structure, where the parent firm’s corporate treasury effectively mirrors the working of internal capital markets in business practice. We introduce a framework for the sources of funds in the MNE and the foreign subsidiary, discussing its theoretical insights and practical value. We examine the use of internal debt financing that foreign subsidiaries obtain from the corporate treasury. To illustrate the link between theory and practice, we use the full accounts of Nestlé (UK) Ltd., filed with the United Kingdom Companies House, as an example for classroom teaching and learning.