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The emergence and rise of multinational c ompanies has resulted in high levels of international business activities

International finance is an area of financial

that deals with monetary interactions between
two or more countries
concerning itself with the topics such as currency
exchange rates, international monetary system,
FDI including risk
it helps multinational corporations in dealing
with cross border transactions by detailing
various financial aspects involved to these

With increasing volumes and
complexities of international
business, the study of
international finance has become
a specialized subject dealing with
study of-

Foreign exchange markets

Exchange rates
MNC financial systems
Risk management
International accounting systems
1} foreign exchange
Itis the market in which
currencies are bought &
sold against each other.
No single physical location.
A world wide network of
primarily banks connected
through a
telecommunication network.
2}Exchange rates

Another aspect covered in international finance

is that of exchange rate & its determination
In case a fixed exchange rate system is
prevalent, their each member country sells a fix
value for its currency inventories of gold or US
In case of floating exchange rate, it is the
demand & supply of the currency which
determines exchange rate
3} Multinational financial
multinationals are the single most largest
players responsible for international business &
international finance.
MNC has numerous kinds of flows between the
parent company , foreign business clients
MNC take decision on the nature of fund
4} Risk management

The earnings of firms engaged in international

business are subject to fluctuations due to
floating exchange rate.
5} International
International finance also studies the
techniques of preparing consolidated
financial statements of MNCs.
Like international audit, international
taxations etc.
Need an
importance of
Diminishing national

produce products in
Broadenmarketsand diversify
Earn higher returns
Rise in global companies

Single market
Competitive advantage
Rising world trade volumes
Increased cross border
capital flow
Changing nature of money
and capital markets
Expanding technical
Online transaction
New technology
Awareness about services offered in other
Global consumers and
global competition
Development of supporting
financial infrastructure
Increased competition at
global level
Domestic companies too
feel the heat
Components of International
Financial Environment
the international monetary system, which is characterized
by the components: the national and reserve currency,
international collective currencies , the conditions of mutual
convertibility, currency parity, exchange rate, national and
international regulatory mechanisms of exchange rates ;
international payments that serve the movement of goods
and factors of production, financial instruments, and the
balance of payments, which reflect all the transactions
related to international payments;
international financial markets and the mechanisms of
trading by specific financial instruments currency, loans,
international taxation, as the method of mobilization of
international financial management of TNC, where
international investment, risk management, transnational
financing etc. take the main place
Main functions of
international finance
1) Distribution function, which is the mechanism of
international finance carries cash distribution and
redistribution of world product. Due to the international
finance cash funds are created, distributed and used,
different needs of the world economy are met.
Distribution function is intended to promote the
organization of the balanced and efficient global
production and development of all the sectors of the
world economy with the aim of the most complete
satisfaction of necessities of the world community;
Main functions of
international finance
2) The control function, the general essence of which is
monitoring the production and distribution of global social
product in money form by recording and analyzing its
motion. The result of this function is making decisions on
international finance and development of current and
strategy international financial policy;
3) Regulatory function is associated with the intervention of
international monetary and financial institutions with the
help of finance in the process of production ;
4) Stabilizing function is to create stable conditions for
economic and social relations in the global system.