Finance Function in Global Scenrio
-
Upload
amit-sinha -
Category
Documents
-
view
218 -
download
0
Transcript of Finance Function in Global Scenrio
-
8/4/2019 Finance Function in Global Scenrio
1/15
Dr. Amit Kumar Sinha
0
International Financial Management
Finance Function
in Global Scenario
-
8/4/2019 Finance Function in Global Scenrio
2/15
1
International Finance Function
Definition
International Financial Management is a process
or a system ofeffectivemobilisation andutilization offunds (FOREX) in MNCs in whomforex operations have significant influence ondecision making.
ORIt is a system of acquisition and utilization of fundsconsisting of forex in MNCs in such a way that theobjectives of the Enterprise are achieved.
-
8/4/2019 Finance Function in Global Scenrio
3/15
2
Definition of IFM as a Subject
International finance is the branch ofeconomics that studies the dynamics of
exchange rates, foreign investment, globalfinancial system, and how these affectinternational trade. It also studies internationalprojects, international investments and capital
flows, and trade deficits. It includes the studyof futures, options and currency swaps.International finance is a branch ofinternational economics
-
8/4/2019 Finance Function in Global Scenrio
4/15
3
Characteristics of IFM
1. Management offorex funds is core offunction
2. Raising of funds and utilization are majorfunctions
3. It relates to manage exchange-rate andinterest-rate risks
4. It is partly theoretical and partly analyticalin nature
5. It is futuristic in approach
-
8/4/2019 Finance Function in Global Scenrio
5/15
4
Scope of IFM
1. International financial environment
2. Foreign exchange markets, spot and forward
3. Foreign exchange rate determination4. Foreign exchange risk management
5. International capital budgeting
6. Capital structure problems of MNEs
7. Working capital management in MNEs
8. Tax management in MNEs
9. Global acquisition and mergers
-
8/4/2019 Finance Function in Global Scenrio
6/15
5
Significance and Importance of
IFM1. Helps to become a successful global MNC
2. Helps in understanding complexities of globalenvironment
3. Helps in adjustment of impact of global financialevents
4. Allows to minimize the risks of foreign exchangetransactions
5. Helps to identify and exploit opportunities inforeign markets
-
8/4/2019 Finance Function in Global Scenrio
7/15
6
Whats Special about
International Finance? Foreign Exchange Risk
Political Risk
Market Imperfections
Expanded Opportunity Set
-
8/4/2019 Finance Function in Global Scenrio
8/15
7
Whats Special about
International Finance? Foreign Exchange Risk
The risk that foreign currency profits may
evaporate in dollar terms due tounanticipated unfavorable exchange ratemovements.
Political Risk
Sovereign governments have the right toregulate the movement of goods, capital, andpeople across their borders. These laws
sometimes change in unexpected ways
-
8/4/2019 Finance Function in Global Scenrio
9/15
8
Market Imperfections
Legal restrictions on movement of
goods, people, and money Transactions costs
Shipping costs
Tax arbitrage
Whats Special about
International Finance?
-
8/4/2019 Finance Function in Global Scenrio
10/15
9
Expanded Opportunity Set
It doesnt make sense to play in only
one corner of the sandbox. True for corporations as well as
individual investors.
Whats Special about
International Finance?
-
8/4/2019 Finance Function in Global Scenrio
11/15
10
The focus of the subject is to equip with theintellectual toolbox of an effective globalmanagerbut what goal should this effectiveglobal manager be working toward?
Maximization of shareholder wealth?
or
Other Goals?
Goals for International Financial
Management
-
8/4/2019 Finance Function in Global Scenrio
12/15
11
Maximization of ShareholdersWealth
Long accepted as a goal in the Anglo-Saxoncountries, but complications arise.
Who are and where are theshareholders?
In what currency should we maximize
their wealth?
-
8/4/2019 Finance Function in Global Scenrio
13/15
12
Other Goals
In other countries shareholders are viewed asmerely one among many stakeholders ofthe firm including: Employees
Suppliers
Customers
In Japan, managers have typically sought tomaximize the value of the organization.
-
8/4/2019 Finance Function in Global Scenrio
14/15
13
Other Goals
No matter what the other goals, they cannotbe achieved in the long term if themaximization of shareholders/ corporatewealth is not given due consideration alongwith environmental and social concerns.
-
8/4/2019 Finance Function in Global Scenrio
15/15
14
Globalization of InternationalFinance: Recent Trends
Emergence of Globalized Financial Markets
Liberalization and Integration
Privatization / Deregulation of Markets Disintermediation/Emergence of Equity Cult
Emergence of New Markets like Hong Kong
etc. Functional Unification (Banks Providing all
Functions)
Innovations/Financial Engineering