International

Financial
Management
BSMN G05
Financial Management

Prof. Eric M. Villamar

 Prepared by:
Marianne M. Miranda
A0720628@PWU.EDU.PH
Table of contents

01 Definition 02 History
What is International History of International
Financial Management? Business Finance

03 Difference 04 Sources
Difference of Sources of International
International and Financial Management
domestic Financial
Management
 01
Definition
What is International Financial
Management?
What is International Financial
Management?
● International Financial Management is the art of managing
money on a global scale.
● The main objective of international financial management is
to “maximize shareholder wealth”
● IFM is a popular concept which means management of
finance in an international business environment, it implies,
doing trade and making money through the exchange of
foreign currency.
● The international financial activities help the organizations to
connect the the international dealings with overseas business
partners- customers, suppliers, lenders. It is also used by
government organizations and non-profit institutions.
 02
History
International Business Finance
History of International
Business Finance
● International Financial Management came into existence
when the countries of the world started opening their doors for
each other. This phenomenon is well known by the name of
LIBERALIZATION.
● Due to the open environment and freedom to conduct
business in any corner of the world, entrepreneurs started
looking for opportunities even outside their country
boundaries.
● Apart from everything else, we cannot forget the contribution
of financial innovations such as currency derivatives;
cross-border stock listings, multi-currency bonds, and
international mutual funds.
 03
Differences
International and domestic Financial Management
Foreign Exchange
It is an additional risk which a finance manager is
required to cater to under an International Financial
Management setting. Foreign exchange risk refers to the
risk of fluctuating prices of currency which has the
potential to convert a profitable deal into a loss making
one.
Political Risks
Political risk may include any change in the economic
environment of the country viz. Taxation Rules, contract
Act etc. It is pertaining to the government of a country
which can anytime change the rules of the game in an
unexpected manner.
Market Imperfection
Having done a lot of integration in the world economy, it
has got a lot of differences across the countries in terms
of transportation cost, different tax rates, etc. Imperfect
markets force a finance manager to strive for best
opportunities across the countries.
Enhanced Opportunity Set
By doing business in other than native countries, a
business expands its chances of reaping fruits of different
taste. Not only does it enhances the opportunity for the
business but also diversifies the overall risk of a business.
 04
Sources
Sources which a company can increase its
capital
Licensing
License means to give permission. A license may be
granted by a party (Licensor) to another party (licensee)
as an element of an agreement between those parties.

A license may be issued by authorities, to allow an

activity that would otherwise be forbidden. It may require
paying a fee and/or proving a capability. The
requirement may also serve to keep the authorities
informed on a type of activity, and to give them the
opportunity to set conditions and limitations.
Franchising
Franchising is the practice of selling the right to use a
firm’s successful business model. For the franchisor, the
franchise is an alternative to building ‘chain stores’ to
distribute goods that avoids the investments and liability
of chain. The franchisor’s success depends on the
success of the franchisees. The franchisee is said to have
a greater incentive than a direct employee because he or
she has a direct stake in the business.
The Franchisor is a supplier who allows an operator, or a
franchisee, to use the supplier’s trademark and distribute
the supplier’s good. In return, the operator pays the
supplier a fee.
Subsidiaries & Acquisitions
A subsidiary is a company that is completely or partly
owned by another corporation that owns more than half
of the subsidiary’s stock, and which normally acts as a
holding corporation which at least partly or a parent
corporation, wholly controls the activities and policies of
the daughter company.
Mergers and acquisitions are both aspects of corporate
strategy, corporate finance and management dealing
with the buying, selling, dividing and combining of
different companies and similar entities that can help
and enterprise grow rapidly in its sector or location of
origin, or a new field or new location, without creating a
subsidiary, othe child entity or using a joint venture.
Strategic Alliances
A strategic alliance is an arrangement between two
companies to undertake a mutually beneficial project
while each retains its independence.
The agreement is less complex and less binding than a
joint venture.
A company may enter into strategic alliance to expand
into a new market, improve its product line, or develop an
edge over competitor. The arrangement allows to
businesses to work toward a common goal that will
benefit both.
Exporting
Export refers to a product or service produced in one
country but sold to a buyer abroad. Exports are one of
the oldest form of economic transfer and occur on a
large scale between nations.
Companies export products and services for a variety of
reasons. It can increase sales and profits if the goods
create new markets or expand existing ones, and they
may even present opportunity to capture significant
global market share. Companies that export spread
business risk by diversifying into multiple markets.
 05
Conclusion
Compared to national financial markets, International financial
market have a different shape and analytics. Proper
management of international finances can help the
organization in achieving same efficiency and effectiveness in
all market. Without IFM sustaining in the market can be difficult.
“Finance without strategy is just
numbers, and strategy without
finance is just dreaming.”

-E. Faber