Interest Rates

Definition: 

Interest rates refer to the cost of debt; the percentage of the principal to be repaid by the firm for the use of the funds. An expense to the firm.

Debt can be accessed from global markets through financial institutions such as Investment Banks. 

Firms could obtain debt financing from a nation that has cheaper rates of interest, thus reducing the costs of the firm.

Interest rates can fluctuate, depending upon the economic conditions of the nation through which funds obtained; increasing costs of the firm.

The main risk, however, is currency risk. If the exchange rate moves adversely for the borrowing firm (if the AUD goes down relative to other currency), the amount owed to the international debtor can increase substantially.