Chapter 4 Flashcards
is the strategic management of financial activities across national borders.
International financial management
entails overseeing global financial operations such as investing, financing, and risk management.
International financial management
study of monetary interactions between two or more countries, focusing on areas such as foreign direct investment and currency exchange rates.
International financial management
– is an art and science of handling and managing monetary resources
Finance
is the activity concerned with planning, raising, controlling and administering of funds used in the business.
Financial Management
( Gauthman and Dougal)
DISTINCTION AMONG INTERNATIONAL AND DOMESTIC FINANCIAL MANAGEMENT
Outside exchange
Political hazard
Market in perfection
Improved opportunity set
Problems such as importing and exporting
Outside exchange
Conflict between two countries changes of presidents and policies tariffs and trades
Political hazard
Risk that an investment return to the could suffer as a result of political changes or instability in a country
Political hazard
Perfect competition doesn’t exist
Market imperfection
isa step-by-step approach to meet one’s life goals.
Financial planning
acts as a guide as you go through life’s journey.
financial plan
What Are the 7 Steps of Financial Planning?
Step 1: Understanding the Client’s Personal and Financial Circumstances
Step 2: Identifying and Selecting Goals
Step 3: Analyzing the Client’s Current Course of Action
Step 4: Developing the Financial Planning Recommendation(s)
Step 5: Presenting the Financial Planning Recommendations
Step 6: Implementing the Financial Planning Recommendation(s)
Step 7: Monitoring Progress and Updating
FEATURES AND GOALS OF INTERNATIONAL FINANCIAL MANAGEMENT
Foreign exchange risk
Political risk
Expanded opportunity sets
Market imperfections
refers to the losses that an international financial transaction may incur due to currency fluctuations.
Foreign exchange risk
can also affect investors, who trade in international markets, and businesses engaged in the import/export of products or services to multiple countries.
Foreign exchange risk
Ranges from the risk of loss (or gain) from unforeseen government actions or other events of a political character such as acts of terrorism to outright expropriation of assets held by foreigners.
Political Risk
Firms can locate production in any country or region of the world to maximize their performance and raise funds in any capital market where the cost of capital is lowest.
Expanded Opportunity Sets
variety of barriers still hamper free movement of people, goods, services, and capital across national boundaries.
Market Imperfections
These barriers include legal restrictions, excessive transaction and transportation costs, and discriminatory taxation.
Market imperfection
which of present various functions and impediments preventing markets from functioning perfectly, play an important role in motivating MNCs to locate production overseas.
Market imperfections
GOALS OF INTERNATIONAL FINANCIAL
MANAGEMENT
The main goal of international Financial Management include ensuring an uninterrupted supply of funds for the business activities of the organization and its optimum utilization so as to generate the highest possible returns for the business.
Basic Goals
Wealth Maximization of Shareholders.
Profit Maximization.
Secondary Objectives
Optimum Rate of interest.
Foreign exchange risk management.
Political risk management.
Proper tax planning.
Effective inflation risk management.
Maximization of Shareholders value.
IMPORTANCE OF IMF
It is, be that as it may, the center factor to fruitful business tasks.
Cash is overall oil that keeps the nearby and worldwide endeavour dynamic
SCOPE OF INTERNATIONAL FINANCE MANAGEMENT
Investment Decisions
Financial Decisions
Dividend Decisions
Investment in Short Term & Long Term Projects
Investment decisions
Decision relation to Funding of the Projects
Financial decisions
This decision relates to how much of the earnings to be distributed as dividends? How much to be kept as retained earnings?
Dividend decisions
INTERNATIONAL
FINANCIAL INSTITUTIONS
International financial corporation
International monetary fund
World trade organization
World bank
organizations established to facilitate global economic cooperation, provide financial assistance, and support the development of member countries.
International financial institutions
is aninternational financial institutionthat offersinvestment, advisory, andasset-managementservices to encourageprivate-sector developmentinless developed countries. The IFC is a member of theWorld Bank Groupand is headquartered inWashington, D.C.in theUnited States.
International Finance Corporation(IFC)
aims to ensure global financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. It provides loans and financial assistance to member countries facing balance of payments problems.
International monetary fund
is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and enforce the rules that govern international trade.
World Trade Organization
comprises five institutions, with the two main entities being the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The World Bank offers financial and technical assistance to developing countries for developmental projects, infrastructure, health, education, and other initiatives to reduce poverty.
World Bank
