The paper tells that еhe world is now a global village – a phenomenon which can be interpreted as a fact that the advancement in communication and technology has integrated the various economies on the globe. A brief analysis of the current economic scenario of any country would reveal that it is, in one way or the other, dependent on the social and economical activities of the other countries. A downward plunge in the New York stock exchange is likely to send shockwaves all across the globe which can be felt in financial market as further as Far East countries. Recently, when the cherished credit rating of United State of America was downgraded to AA+ from AAA, it caused turmoil at a global stage especially in the European countries. All the giant economies such as China and India were badly affected. The economies are have become interlinked in this era due to the fact that now the firms are indulging in international trade and have started exploring markets outside their place of origin. Companies such as HSBC holdings, General Electric, ExxonMobil, British Petroleum and Toyota Motor have two things in common. First, they are the leading and biggest multinationals in the world and second, they all practice prudent international financial management. From a theoretical point of view, the firms engage in international trade in order to obtain comparative advantage which allows the firms to penetrate the foreign markets. Other popular explanations for the firms indulging in the international trade are the product cycle theory and imperfect market theory. There are several ways through which a firm can participate in international business. The most common methods are International Trade Licensing Franchising Joint Ventures Acquisition of companies Foreign subsidiary International Financial Markets In today’s economy, international business is carried out at international financial market. These markets can be categorized as foreign exchange market, international money market, international credit market, international bond market and international stock market. Foreign Exchange market allows for the trading of different currencies at a rate which is determined based on several facts such as inflation and relative interest rates. Foreign exchange market is not a specific building or place; rather the companies indulge in foreign currency transaction through commercial banks and telecommunication networks. Foreign exchange dealers serve intermediaries between the companies who intend to enter into a foreign exchange transaction. In International Money Market, the trading of currency futures and options takes place. Globalization have abridged the distances and abridged the financial bridges between the countries. Multinationals can now obtain medium and long term loan from banks and financial institution located in other countries. Especially in Europe these loans are termed as euro credit loans and are transacted in the Euro Credit market. The international credit markets are now developing rapidly in Asia and South America. Recent global economic events have revealed
This research begins with the brief overview of international financial management. There are several ways through which a firm can participate in international business. The most common methods are international trade; licensing; franchising; joint ventures; acquisition of companies; foreign subsidiary…
Whereas the spot (or nominal) exchange rate refers to the present price of a foreign exchange, a forward exchange rate refers to the future price of foreign exchange at a specified date (Bhole, and Mahakud, 2009). 2. Introduction The foreign exchange market involves the buying and selling of national currencies (Ajami, 2006).
USD 5,423 Ans-5) = 1.800 – 1.7800 = 0.02 = 0.02 * 90/365 = 4.4% on discount Ans-6) (d). Translation Risk can be avoided by matching the currency of an asset with the currency of an equivalent liability Ans-7) (c). Netting reduces currency conversion costs within the Group Ans-8) (b).
Minimizing problems 13 6. Conclusion 14 Reference List 16 1. Introduction International companies spread around the world carry out transactions with foreign counterparts which run into millions of dollars. A significant portion of the cross border transaction constitutes foreign direct investment (Achrol, 2011).
The exchange rate regime is the way that a particular country manages its local currency in respect with foreign currencies in the foreign exchange market. The exchange rate regime basically depends on the fiscal/monetary policy mix of a particular country and the exchange rate is determined by the central bank of the country.
ot exchange rates were used in computing forward exchange rates which are the rates at which a bank or any party is willing to exchange or trade one currency for another at some prescribed date in the future. The forward exchange rate is a kind of a forward price. This rate is
de an evaluation of international risks that company faces in relation to foreign exchange rates and discussion of the appropriate methods of managing those risks
The interest rate is annualized so it must be converted into 6-month time. By discounting the borrowed amount of
These include first, efficient production of products in the foreign market as compared to domestic market. Secondly, companies are able to easily obtain raw materials that they use in their production
Expected Utility Theory and the Modigliani-Miller theory is also taken into consideration which explains that the financial decisions of a company do not have an effect on its value. The report has also focused on the
To be successful in this venture of overseas investment, the company must begin first by determining the risk that characterizes the investment climate of the countries under its consideration. This would involve a careful analysis of both the economic, political and business risks associated with such investments in these countries
4 pages (1000 words)Essay
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