This document provides an introduction to international finance. It discusses how companies and individuals can now raise funds, invest money, produce goods and sell products globally. This increased internationalization brings both opportunities in larger markets but also additional risks that must be managed. It gives examples of how trade and consumption have become highly globalized with people routinely purchasing goods from all around the world. Production has also become global as companies source inputs and locate production wherever costs are lowest. Financial markets too have integrated as investors diversify portfolios across borders. The document outlines some of the key questions international finance practitioners must address such as how to analyze investments across countries while accounting for currency and political risks.

1. WELCOME TOINTERNATIONAL FINANCECOACH-RAGINI KHANNA

2. Why is International Finance Important?In previous finance courses you have been taught about general finance concepts that apply to domestic or local settings, BUT we live in an international world.

3. Companies (and individuals) can raise funds, invest money, buy inputs, produce goods and sell products and services overseas.

4. With these increased opportunities comes additional risks. We need to know how to identify these risks and then how to control or remove them.American consumers routinely purchase Oil imported from Saudi Arabia and Nigeria.TV sets and camcorders from JapanAutomobiles from GermanyGarments from ChinaShoes from IndonesiaPasta from ItalyWine from FranceEffect on Consumption

5. Foreigners in return purchaseAmerican-made aircrafts, Software, Movies, Jeans, and other products.Continued liberalization of International trade is certain to further internationalize consumption patterns around the world.Effect on Consumption

6. Like consumption, production of goods and services has also become highly globalized.MNCs efforts to source inputs and locate production anywhere in the world where costs are lower and profits are higher.E.g. IBMEffect on Production

7. Financial Markets have also become Highly Integrated. e.g. Diversified Investment Portfolios.E.g. Japanese investors are investing heavily in U.S. and other Foreign financial Markets in efforts to recycle their enormous trade surpluses.Other examples-IBM, Sony etc.Financial Markets

8. Dr. Reddy (A)GAIL (G)GRASIM Inds (G)ICICI Bank (A)Infosys Tech (A)ITC (G)L& T (G)M&M (G)SBI (G)Tata Comm (A)Indian Companies Issuing ADR’s & GDR’s

9. Foreign exchange risk

10. E.g., an unexpected devaluation adversely affects your export market…

11. Political risk

12. E.g., an unexpected overturn of the government that jeopardizes existing negotiated contracts…

13. Market imperfections

14. E.g., trade barriers and tax incentives may affect location of production…

15. Expanded opportunity sets

16. E.g., raise funds in global markets, gains from economies of scale…What is special about international finance?

17. So Finally we can say that…..Rapidly integrating markets have stretched firms across borders and increased the importance of foreign operations to firms around the world.

18. What do finance practitioners need to know to operate in a global setting?Now the Question arises….

19. Finance practitioners are faced with numerous questions that require well-developed intuitions from a domestic setting to be reinvented in an international setting.