1. INTERNATIONAL FINANCIAL MANAGEMENT- JUNE 2009
WHAT IS EURO CURRENCY MARKET?
The money market in which Eurocurrency, currency held in banks outside of the
country where it is legal tender, is borrowed and lent by banks in Europe. In
short, Eurocurrency is the Funds deposited in a bank when those funds are
denominated in a currency differing from the bank's own domestic currency
Rates on deposits in the Eurocurrency market are typically higher than in the
domestic market, because the depositor is not protected by domestic banking
laws and does not have governmental deposit insurance.
WHAT IS FUNCTIONAL CURRENCY? HOW IT IS DIFFERENT FROM REPORTING CURRENCY?
The primary type (main currency) of money that a company uses in its business
activities. Often (generally) a company's functional currency is the same as that
of the nation in which it is headquartered. In short, the most used currency
for a company will be its functional currency.
The reporting currency is the currency in which all the financial reports fromthe
multicurrency firms(Financial reports of a company from all nations) are
converted into a single reporting currency at the current exchange rate.
WHAT IS AN OPEN ACCOUNT AS A METHOD OF PAYMENT?
An open account transaction is a sale where the goods are shipped and delivered before
payment is due, which in international sales is typically in 30, 60 or 90 days.In short,
exporter sales goods to importer on credit for a period of 30/60/90 days.
WHAT IS FORFAITING?
Forfaiting is a process where a third party purchases the receivables of the exporter. In
short, Mr. X exporting goods worth rupees 10000 on credit to Mr. Y for 30 days, so in case
of forfaiting , 3rd
party (Mr. Z) will pay an amount (lesser than 10000/) 9500 to the exporter
and will take 10000 from the importer in 30 days times , making a benefit of 500 in 30 days.
WHAT IS EURO CURRCNCY DEPOSIT?
A deposit of a cash investment originating from a country other than the one
in which the deposit resides.
e.g.:- Deposit of Thai Bhatt in India will be called as Eurocurrency deposit
A short-term fixed-rate time deposit denominated in a currency other than the
local currency (e.g., U.S. dollars deposited in a London bank).

2. WHAT IS VALUE AT RISK?
A method used to measure the level of financial risk within a firm or
investment portfolio over a specific time period. Value at risk is used by risk
managers in order to measure and control the level of risk which the firm
undertakes.
WHAT IS BALANCE SHEET HEDGE?
WHAT IS A DROP LOCK FLOATING RATE NOTE?
An arrangement/ process whereby the interest rate on a floating rate note
becomes fixed if it falls to a specified level.
e.g:- if the floating rate interest is 8% p.a. and suddenly it falls to 5% and that is
the minimum % level then it will now fall below 5%, it will be fixed at that level.
WHAT IS EXPROPRIATION?
It is an act where Government takes/acquires the private property for the benefit
of public. The expropriation can be done forcefully or with mutual consent.
WHAT IS SENSITIVITY ANALYSIS?********
Sensitivity analysis is a way to predict (forecast/ guess) the outcome (result) of a
decision if a situation turns out to be different compared to the key prediction. In
short, it is an analysis which helps to get different results for small changes.
WHAT IS TRADE OFF BETWEEN RISK AND RETURN?
The principle that potential return rises with an increase in risk. Low levels of
uncertainty (low-risk) are associated with low potential returns, whereas high
levels of uncertainty (high-risk) are associated with high potential returns.
In short, The more you take risk of losing money, the more are the chances of
earning money.
WHAT IS HOST GOVT. TAKE OVER?