GLOBAL

Finance
Global Finace
 Important terms and
definition
Finance –the art and science of managing money.
Financial Management – refers to capital
procurement, fund allocation, capital restructuring
and profit administration which involves financial
planning, analysis of financial condition and
supervision of fianacial operation.
Financial Manager – the one who actively handles the
financial affairs of the business firm which task
involve in Financial planning and forecasting, making
investment and financing decision and risk
management
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 Scope of Financial
Management.

a. Working Capital Management.

b. Investment/Portfolio Analysis
c. Capital Investment analysis
d. Capital Structure

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 Goal of Financial
Management

❑ Profit Maximation
❑ Value maximation
❑ Maximizing shareholders’ wealth

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 Major Decision in the
Finance Function

❑ Investing Decision
Involves provision of capital to proposal or projects
whose benefits are to be realized in the future.
❑ Financing Decision
It involves determination of the best capital
structure in determining the best mix of debt,
equity, and hybrid securities to employ.

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 Major Decision in the
Finance Function

❑ Dividend Decision
Involves allocation of cash to be distributed to
shareholders. Excess cash can be distributed to
stockholders directly through dividend.
❑ Risk Management
It involves in determining which risk to accept,
which to neutralize, and which to transfer. The four
key process are identification, assessment,
mitigation and transfer.
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 Financing with International
bonds
❑ International bonds
Debt securities issued by foreign companies or
governments and sold domestically.
❑ How it works
Foreign companies or government may issue
bonds that are scrutinized and sold to domestic
investors in the form of international bonds. These
bonds are typically denominated and pay interest
in currency of the issuing country.
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 Financing with International
bonds

❑ Why it matters
International bonds can be used to hedge
against currency and country-specific risk.
For example, Americans invested in
International bonds have reaped the gains
from falling US dollar in recent years as it has
made interest payments from foreign bonds
worth more in dollar terms.
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 Global Finance defined

❑ Global Finance
Refers to the International framework of
economies, regulations, financial institutions
and how these things interact with each
other. The study of monetary interactions
between two or more countries, focusing on
areas such as foreign investment and
currency exchange rates.

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 Importance of Global
Finance
❑ Global economy is interconnected
❑ Financial situations in countries all
over the world affect the global
economy.
❑ Global forces affect competition.
❑ To pursue growth, businesses have
to adapt to ever-changing markets.

Copyright© 2006 South-Western/Thomson Learning. All rights reserved.

 Importance of Global
Finance
❑ Financial planning and decision making for
corporations in multinational environments.
❑ Measuring and managing risks asscociated
with currency exchange rates.
❑ Financing international trade
❑ Analyzing risks on per-country basis.
❑ The role of financial institution in the global
economy
❑ Financial regulations.
Copyright© 2006 South-Western/Thomson Learning. All rights reserved.
Thank you.

Copyright© 2006 South-Western/Thomson Learning. All rights reserved.