Nature and scope of international finance
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This document is a presentation on international finance that was given by Dr. Mital Bhayani. The presentation defines international finance as monetary transactions between two or more countries. It outlines the learning objectives, which are to explain the meaning of international finance, appreciate its importance and goals, describe its nature, compare it to domestic finance, and outline its scope. The presentation then covers the meaning, importance, nature, scope of international finance and how a country's economic wellbeing relates to globalization. It discusses key aspects like exchange rates, foreign exchange risk, political risk, and market imperfections.
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Discussion board
The international monetary system facilitates international trade and investment. Historically
there have been a variety of systems which has resulted in today’s multifaceted system.
Describe the current international monetary system and your impression of the effectiveness and
efficiency of the system.
Discuss the various strategies that financial managers can use to optimize their company’s
financial performance? Include in your answer the risks – transaction, translation, and economic.
Which one of the three risks mentioned in #2 has the most impact on a company? Why?
Your response should be at least 250 words
Solution
IMF is making strategies for supporting the developing and poor nations. they are providiing
many guidelines and they are facilitating poor nations to become rich. it is taking different
mesures and donating and contributing financial support to developing nations at lesser interest.
it is also helping different nations to form associations and promote their common goal around
the countries. they are assigning tasks based on regions and ask them to perform well and next
they should assist remaining nations.
but unfortunately what ever the measures or steps taken to minimize the inequality between poor
and rich, they are resulting in opposite way only. the rich nations are becoming more rich and
poor are becoming still poor and sick. indirectly it is giving chance to the strongers and they are
becoming more stronger than earlier. the strategies are not giving the positive and expected
results.
the best ways to increase revenues and profits are either increasing the sales or decreasing the
costs. now a days majority of the firms focusing on both these activities. to promote their product
internationally they are using internaitonal markets for expansion. they are more stabilizing their
revenues by concentrating on more than one market.
they are exporting their products international wide and getting revenues from around the world.
their transactions are international wide and selling the products around the globe. to minimise
business and economic risks they are doing business with different nations at a time. and in this
regards they are focusing on the foreign exchange transactions also. by taking correct strategies
they are able to convert the international currencies into domestic currency. by diversifying into
different nations and different currencies they are minimising the risk factors.
and by contributing business services and activities they are promoting the economic well being
of the community and economically the nation is becoming healthy and stronger..
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Nature and scope of international finance
- 1. www.sanjivanimba.org.in 308FIN-INTERNATIONAL FINANCE Unit No.1. Introduction to IF and IMS Session No. 1 Presented By: Dr. Mital Bhayani Ph. D (Financial Management), MBA(Finance), NET and SET (Management) 1 Sanjivani College of Engineering, Kopargaon Department of MBA www.sanjivanimba.org.in
- 2. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon At the End of this Session you should be able to: - Explain the meaning of International finance - Appreciate the importance and goals of International finance - Describe the nature of International finance - Compare differences between domestic finance and international finance - Outline the scope of international finance - Relate country’s economic wellbeing with globalization. Session Learning Outcome
- 3. www.sanjivanimba.org.in Introduction to International Finance 3 International Finance 1. What? (Meaning) 2. Why ? (Importance) 3. How? (Nature) 4. Where? (Scope)
- 4. www.sanjivanimba.org.in Meaning of International Finance What is International Finance? “International finance is a study of Monetary transactions between two or more countries ”. “It Can also be referred as International macro-economics”. What is International financial management? “Financial Management in international settings.”
- 5. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon “Optimally making Corporate finance decisions to achieve given corporate objectives .” Which finance Decisions? Which Objectives? What is Financial Management? Raising Finance Reporting and analysis Deployment of Funds Maximizing Shareholders Wealth!!!!!!
- 6. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon “Because we live in highly globalized and integrated economy.” “ Because we want to deal with international business”. “ Domestic financial markets are increasingly integrated internationally.” “ We need to ensure survival of firm” “ Use of different currencies amongst the nations is a major concern” Why we need to study IF ?
- 7. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon “ The rates at which the currencies are exchanged are called as exchange rates” “ The exchange rates are set by variety of arrangements” “These arrangements as well as exchange rates are subject to change.” When exchange rate changes it has impact on: - Sales - Costs - Profits - Asset and liability values
- 8. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon “Exchange rates movements are interrelated with……..:” - Interest rates - Inflation rates - Asset values.
- 9. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon “Its Complex in nature” - Different currencies - Different Exchange rate arrangements - Interrelated macro economic variables - Integrated but imperfect world economy - Risks involved at both sides being global is a risk but being local is riskier. How is it ( Nature)
- 10. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon - Longer distance is involved - Different currency involved - Different rates of interest in different countries - The existence of exchange controls in many countries - Different legal system in different countries - Political systems may be different in different countries - Different tax system in different countries - Customs, convention and ethics differ from country to country What is beyond domestic finance?
- 11. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon • Foreign exchange risk ( Measurement and management) - Forecasting exchange rates - Analyzing its impact - Measuring its risk and designing strategies to manage it • Political risk • Market imperfections • Expanded opportunity sets Scope of IF
- 12. www.sanjivanimba.org.inwww.sanjivanimba.org.inDept. of MBA, Sanjivani COE, Kopargaon What we have to do is…….Consider “ How International events may affect firm and what steps can be taken to exploit positive developments, and insulate the firm from harmful ones”. Conclusion