Beruflich Dokumente
Kultur Dokumente
INTERNATIONAL
FINANCIAL
MANAGEMENT
[Type text]
SYLLABUS
333- INTERNATIONAL FINANCIAL MANAGEMENT
UNIT 1:
International Financial System: Meaning, scope and significance of International
Finance. International Financial System Components and environment. Finance
function in global context International Monetary System fixed and floating
systems Balance of Payments (BOP). International Financial Institutions World
Bank IMF ADB
UNIT II:
Foreign Exchange Market: Players and components, functions Foreign Exchange
Rates Spot Forward and Cross Rates. Theories of determining foreign exchange
rate International Parity condition. Indian Foreign Currency Market Foreign
Exchange Management Act (FEMA) Recent development (Problems and cases).
UNIT III:
Management of Foreign Exchange Risk: Meaning and types of risk Management of
Translation, Transaction, and economic exposure. Tools, Techniques and Hedging
strategies for foreign exchange risk management
UNIT IV:
International Monetary System: Forwards, Swaps, and interest rate futures.
European Monetary markets, Asian Currency Markets, GDRs, ADRs, Blocked
Accounts, Dealing position, Speculation and leveraged arbitrage
UNIT V:
Financial Management of Multinational Firm Foreign Capital Budgeting Decisions
Cash Flow Management Tax and Accounting implications of International activities
[Type text]
UNIT I
INTRODUCTION:
The domestic financial system consists of 4 basic elements. They are given as
i.
Financial Markets
ii.
Market Participants
iii.
Financial Claims
iv.
i.
The exchange of goods and services involving payments and receipts as between
countries.
ii.
iii.
iv.
ii.
ambitious
3) Competition is less
4) Less Risk
and development
[Type text]
[Type text]
International events affect the firms and what steps to grab opportunities from positive
developments and insulate from harmful ones.
Recognize how the firm will be affected by movement in exchange rate, interest rates,
inflation rate.
[Type text]
b) Foreign bond market: In this the amount is raised in the form of bonds in foreign
market.
6. International Money Market: This is further classified into:
a) Euro currency market: In this the European currencies are borrowed and lent.
b) Euro bond market: The amount raised in the form of Euro bonds.
c) Asian currency market: Asian dollars are borrowed and lent.
Treasurer
Financial
Planning
Cash
Management
Fund
Requisition
Investment
Decision
Investment
Decisions
Risk
Management
External
Reporting
Tax Planning
& Management
Management
Information System
Financial Management
and accounting
Budget Planning
and Controlling
Accounts
Receivable
The finance function of an international firm has two functions namely, treasury and
control. The treasurer is responsible for financial planning analysis, fund acquisition, investment
financing, cash management, investment decision and risk management. On the other hand,
controller deals with the functions related to external reporting, tax planning and management,
management information system, financial and management accounting, budget planning and
control, and accounts receivables etc.
For maximizing the returns from investment and to minimize the cost of finance, the firm
has to take portfolio decision based on analytical skills required for this purpose. Since the firm
has to raise funds from different financial markets of the world, which needs to actively exploit
market imperfections and the firms superior forecasting ability to generate purely financial
gains. The complex nature of managing international finance is due to the fact that a wide variety
of financial instruments, products, funding options and investment vehicles are available for both
reactive and proactive management of corporate finance.
6
[Type text]
[Type text]
Other members agreed to fix the parities of their currencies vis--vis dollar with respect
to permissible central parity with one per cent ( 1%) fluctuation on either side. In case
of crossing the limits, the authorities were free hand to intervene to bring back the
exchange rate within limits.
4) Flexible Exchange Rate Regime since 1973:
The flexible exchange rate regime that replaced the Bretton Woods system was ratified
by the Jamaica Agreement. Following a spectacular rise and fall of the US dollar in the 1980s,
major industrial countries agreed to cooperate to achieve greater exchange rate stability. It is a
system based purely on demand and supply for a currency in foreign exchange market.
[Type text]
exchange rate system, (ii) Benefits of free markets are deprived; (iii) There is always possibility
of under-valuation or over-valuation.
b) Flexible (Floating) Exchange Rate System:
A floating exchange rate or fluctuating exchange rate is a type of exchange-rate regime
in which a currency's value is allowed to fluctuate according to the foreign-exchange market. A
currency that uses a floating exchange rate is known as a floating currency. The system of
exchange rate in which rate of exchange is determined by forces of demand and supply of
foreign exchange market is called Flexible Exchange Rate System.
There is no official intervention in foreign exchange market. Under this system, the
central bank, without intervention, allows the exchange rate to adjust so as to equate the supply
and demand for foreign currency. When market forces determine the rate, it is called floating
exchange rate
Merits:
(i) Deficit or surplus in BOP is automatically corrected, (ii) There is no need for government to
hold any foreign exchange reserve, (iii) It helps in optimum resource allocation, (iv) It frees the
government from problem of BOP
Demerits:
(i) It encourages speculation leading to fluctuations in foreign exchange rate, (ii) Wide
fluctuation in exchange rate hampers foreign trade and capital movement between countries, (iii)
It generates inflationary pressure when prices of imports go up due to depreciation of currency.