4. 14.Foreign exchange Risk.
15.Cold War.
16.International Business cycle.
17.Operational Risks.
18.Global Terrorism.
19.International cash management.
20.Credit worthiness.
21.Methods of payment.
22.Foreign exchange markets.
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5. DOMESTIC FINANCE
INTERNATIONAL
FINANCE
ο¨ It is not exposed to
foreign exchange risk
and political risks .
ο¨ It is subject to market
imperfections of one
country.
ο¨ International finance is
related to cross border
transactions and exposed
to foreign exchange and
political risks.
ο¨ It is very much subject to
market imperfections
because MNC βs should
operate in different
economies.
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6. DOMESTIC FINANCE INTERNATIONAL
FINANCE
ο¨ The availability of
portfolio for investment
is limited.
ο¨ It has no scope for
access to global
markets.
ο¨ It is limited in scope.
ο¨ The availability of
portfolios for investment
is wide and large across
the nations in the world.
ο¨ The MNCβs venture into
the arena of global
markets and thereby
benefit from an expanded
business.
ο¨ It has wider scope.
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7. ο¨ Money acts as a medium of exchange both in domestic
and international markets as well.
ο¨ FE market is a market for converting the currency of
one country in to that of another.
ο¨ Without FE market, the international trade and
investment on the scale that we see today would be
impossible and countries would have to resort for
barter.
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8. 1. Exchange rate risk and its management
2. Foreign exchange market
3. Exchange rate determination and forecasting
4. MNC`s investment decision
5. International working capital management
6. International accounting and taxation
7. International financing decision
8. Macro economic analysis- b/p & external debt
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9. ο¨ Domestic FM is concerned with raising and utilizing of funds for projects
with positive NPV. The company wants to minimize the cost of capital
and maximize the ROI
ο¨ MNC operates in different economic, political, cultural, and tax
environments.
ο¨ They operate in various product factor markets
ο¨ They trade in large number of currencies other than home currency-
assets-liabilities-receivables and payables in different currencies.
ο¨ They have easy access to domestic and international capital markets and
access to different markets and instruments
ο¨ They are exposed to foreign exchange and political risks in addition to
interest rate and credit risks.
ο¨ Investments can be made in different markets, instruments etc. and has
wider choices.
ο¨ So financial decisions are more complex than a purely domestic company.
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11. DOMESTIC FINANCIAL
MGT
INTERNATIONAL
FINANCIAL MGT
ο¨ Single currency
ο¨ Financial instruments
use is limited.
ο¨ Unique economic and
legal systems.
ο¨ Single language or few
ο¨ Multiple
ο¨ Large number of
futures,interest
rates,swaps etc
ο¨ Different economic and
legal systems.
ο¨ Language differences
are the core of the
difficulties.
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12. DOMESTIC FINANCIAL
MGT
INTERNATIONAL
FINANCIAL MGT
ο¨ Limited cultures and
subcultures.
ο¨ Country specific
accounting standards
and GAAP principles.
ο¨ Risks are related to
domestic country.
ο¨ Multicultural ,different
values, ethics and code of
conduct.
ο¨ Different accounting
standards and GAAP
principles in different
countries .
ο¨ Multiple risks such as
interest rate risks,currency
risk,political risks etc.
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14. www.StudsPlanet.com
1.Transfer funds from one nation currency to another.
2.Transfer of purchasing power is necessary.
3.Import of food items,petroleum
products,technology,life saving drugs from foreign
countries.
4.For availing services like
education,tourism,healthcare,insurance,banking,hospit
ality,telecommunication,entertainment.
