INTERNATIONAL FINANCIAL MARKET AND ENVIRONMENT

Q-1 The world of international finance?

Answer:
International finance sometimes known as international macroeconomics is a
section of financial economics that deals with the monetary interactions that occur
between two or more countries. This section is concerned with topics that
include foreign direct investment and currency exchange rates. International finance
also involves issues pertaining to financial management, such as political and foreign
exchange risk that comes with managing multinational corporations. Concepts and
theories that are key parts of international finance and its research include
the “Mundell Fleming model”, the International Fisher Effect, the optimum currency
area theory, purchasing power parity and interest rate parity.
International or foreign trading is arguably the most important factor in the
prosperity and growth of economies that participate in the exchange. The growing
popularity and rate of globalization have magnified the importance of international
finance. Another aspect to consider, in terms of international finance, is that the
United States has shifted from being the largest international creditor (lending money
to foreign nations) and has since become the world's largest international debtor; the
United States is taking money and funding from organizations and countries around
the world. These aspects are key elements of international finance.

Q-2 BENEFITS OF STUDYING INTERNATIONAL FINANCE?

ANSWER:
ADVANTAGES

1. It provides a foundation for international growth.

Companies that are involved in exporting can achieve levels of growth that may
not be possible if they only focus on their domestic markets. This allows brands and
businesses an opportunity to achieve sustained revenues from a diversified portfolio
of customers in several markets instead of a limited customer base in a single home
market.

2. International trade improves financial performance.

Brands and businesses which assert themselves in foreign trade work can
increase their financial performance. This allows them to augment the returns they
achieve on their investments into research and development. By rotating the
products or services through the global market, the commercial lifespan of each
opportunity can be amplified, expanding what existing products and services can
provide. This benefit can even be achieved if a domestic market is no longer
interested.

3. It spreads out the risk a brand and business must assume.

Organizations can better protect themselves from risk thanks to international

trade because of the amount of diversification that can be achieved. Whether it is a
financial disaster, like the Great Recession of 2007-2009, or a natural disaster like
Hurricane Katrina, a company with an international presence can survive and even
maintain profitability without domestic customer support. A home market may be
unstable, but international trade can still let the brand and business be stable.

4. International trade encourages market competitiveness.

When a brand and business competes in several markets simultaneously, then it

must focus on its competitiveness for it to be able to thrive. By observing a larger
range of trends because of their greater level of global market access, brands and
businesses can focus on quality, design, and product development improvements so
that they can continuously improve and diversify.

5. International exchange rates can be beneficial to a business.

Brands and businesses involved with international trade can further reduce their
risk by taking advantage of monetary exchange rates. If a company does most of its
trading in US dollars, then trading with Japan to spread the risk of the exchange rate
between the yen and the dollar can potentially add to the profits of the company. The
same could be said of the euro or the pound to the dollar.

6. Revenue streams have some protection.

Although all risk cannot be eliminated from international trade, a series of

contracts, insurance, and financial instrument trading can help to protect the revenue
streams a brand and business is able to develop.
 7. It can be used as a way to get around high levels of domestic
competition.

A domestic market can have several products or services that are like what a
new brand and business is trying to offer. Instead of competing for a small sliver of
that domestic market, going through international trade can help an organization
target similar foreign markets where competition may be much lower. Over time, the
experiences gained in the foreign market can help an organization be able to
establish a stronger domestic presence as well.

8. Borrow during tough time

Access to capital markets across the world enables a country to borrow during
tough times and lend during good times.
9. Promote domestic investment
It promotes domestic investment and growth through capital import.

10. Worldwide cash flows

Worldwide cash flows can exert a corrective force against bad government policies.

11. Healthy competition

International finance leads to healthy competition and, hence, a more effective

banking system.

12. Excessive information

It provides information on the vital areas of investments and leads to effective

capital allocation.

International finance promotes the integration of economies, facilitating the easy

flow of capital. The free transfer of funds would eventually result in more equality
among countries that are a part of the global financial system.
Q-3 IMPORTANCE OF INTERNATIONAL FINANCE?
ANSWER:
With the advancement of technology, telecommunications, etc. the world of
commercialization has taken an uproar. It requires understanding complexities
involved in doing business. As the reach has broadened, the challenges have also
expanded. Therefore, people need to know the subject in order to function swiftly in
desired business surface. Whoever wants to study business market should also
have the knowledge about this subject.

This subject deals with few aspects that play a key role in international
market. Therefore when needing international financial management homework
solutions, one should first understand the following aspects.

1. Knowing the currency

A person dealing in international market needs to know the different foreign

exchange policies. It is necessary to understand fluctuations in different currency
rate all over the world.

2. Political conditions

When we talk about international financial management, it automatically involves

political conditions of different countries as well. And these changes in political
scenario cause a shift in international market as well.

3. Economic conditions

Not all market is similar. Every different market has their own unique features. It
deals with their own rules. Therefore, to carry on business in overseas market one
should understand that market grounds properly. It also helps in identifying business
prospects.

4. Expanding

Doing business in global forum means it has better chances of expansion.

International business involves people on a large scale, thus helping to gain more
business opportunities. In turn, it helps the country to grow and find its position in the
global market.

5. Risk management

International business is not easy at all. It involves a lot of risk around it. The
study of International Financial Management provides many risk management
solutions. As a result, people having detail knowledge of this subject understand the
market risks better and deals with it appropriately.
Importance of International Finance

International finance plays a critical role in international trade and inter-economy

exchange of goods and services. It is important for a number of reasons, the most
notable ones are listed here:

 International finance is an important tool to find the exchange rates, compare

inflation rates, get an idea about investing in international debt securities,
ascertain the economic status of other countries and judge the foreign
markets.

 Exchange rates are very important in international finance, as they let us

determine the relative values of currencies. International finance helps in
calculating these rates.

 Various economic factors help in making international investment decisions.

Economic factors of economies help in determining whether or not investors’
money is safe with foreign debt securities.

 Utilizing IFRS is an important factor for many stages of international finance.

Financial statements made by the countries that have adopted IFRS are
similar. It helps many countries to follow similar reporting systems.

 IFRS system, which is a part of international finance, also helps in saving

money by following the rules of reporting on a single accounting standard.

 International finance has grown in stature due to globalization. It helps

understand the basics of all international organizations and keeps the
balance intact among them.

 An international finance system maintains peace among the nations. Without

a solid finance measure, all nations would work for their self-interest.
International finance helps in keeping that issue at bay.

 International finance organizations, such as IMF, the World Bank, etc.,

provide a mediators’ role in managing international finance disputes.

The very existence of an international financial system means that there are
possibilities of international financial crises. This is where the study of international
finance becomes very important. To know about the international financial crises,
we have to understand the nature of the international financial system. Without
international finance, chances of conflicts and thereby, a resultant mess, is
apparent. International finance helps keep international issues in a disciplined state.
What are the careers made from studying International Financial system?

1. Financial manager
2. Research associate
3. International communication analyst
4. Financial Services’ Sale agent
5. International associate
6. Trade finance analyst
7. International financial reporter
8. Financial analyst
9. International accountant
10. International Public Relations Officer
11. International Tax analyst
12. Global Market analyst
13. Internal auditor
14. Country Program Coordinator

Therefore we can conclude; international financial management is a broad

category that requires an understanding of many sections. It has many concepts and
theories involved. That is why for international financial management homework
solutions there are online sites that give out manuals. These sites also have ways to
solve problems of this study. Their aim is to make the subject easier. So students in
need of help with this subject can find their solutions in online manuals.