INTERNATIONAL

FINANCIAL
MANAGEMENT
INTRODUCTION
 MEANING:
• 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.
• It includes foreign direct investment and currency
exchange rates.
• International finance also involves issues pertaining to
financial management, such as the political and foreign
exchange risk that comes with managing multinational
corporations.
 Contd.:
• It examines the changes in international trade,
balance of payments changes in the macro
economic structures,exchange rates,monetary
standards,FDI.
• Investors and mncs should manage the risks
associated with the international dealings like
political risks, foreign exchange risks,credit risks
including exposures like transaction
exposure,translation exposure,economic exposure.
 Components of international finance:

• Foreign exchange risks

• exposures
• political risks
• Market imperfections
• Expanded opportunity sets.
 Scope of IFM:
• International institutions
• Balance of payments
• International financial markets
• Forex markets
• International financial services
• International taxation
• International accounting
 International institutions:

 International financial corporations:supports

sustainable invts. Of lesser developed countries.
 International monetary fund:monitors
BOP,lender of last resort
 World bank:funds towards development of
projects
 World trade organisations:resolves disputes and
negotiations
 International financial services:
• Products and services offered by
institutionsfor various transactions:
• Fund based:hire purchase,lease
financing,venture
capital,factoring,forfaiting,mutual funds etc.
• Fee based:merchant banking,loan
syndication,credit rating agencies etc.
 Contd.:
• Balance of payments:accounting record of all the
monetary transactions of a country with rest of
the world.
• International financial markets:maney markets
and capital markets.
• Money markets:forex market,euro currency
markets
• Capital markets:depository receipts,euro bond
market
 Forex markets:
• Most liquid market
• Most dynamic market
• 24*7 market
• Market transparency
• International network of dealers
• Most traded currency is dollar
• Over the counter market
• Banks,corporates can be the participants
 Scope of international business:
• Export and import of goods
• Export and import of services
• Franchising
• Foreign investments
• licensing
 Features:
• Foreign rate risk
• Political risk
• Expanded opportunity sets
• Market imperfections
• Tax systems
• Difference in culture
• Laws of nations
 Nature:
1.Accurate Information
2. Information not only accurate but should be
timely
3. The size of the international business should be
large
4. Market segmentation based on geographic
segmentation
5. International markets have more potential than
domestic market