L5InternationalFinance

,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,12/5/2019,#,INTERNATIONAL FINANCE,Rajapruk University-International Business,By Aj.Phunnapost Darartn(Mike),The emergence and rise of multinational companies has resulted in high levels of international business activities.International business encompasses commercial transactions like sales,investment and transportation between two or more companies.,These cross border flows has resulted in world economy.Due to this there is a need to manage the,international finance,INTRODUCTION,MEANING&SCOPE,International finance is an area of financial economics,that deals with monetary interactions between two or more countries,concerning itself with the topics such as currency exchange rates,international monetary system,FDI including risk,it helps multinational corporations in dealing with cross border transactions by detailing various financial aspects involved to these transactions.,Online transaction is expanding globally,New financial technical tools(financial options)acquired through risk management.,Awareness about financial services offered in other countries.,Expanding technical infrastructure,Local Market versus Global Market Access,Market Liquidity or Size on Financing Costs,Iiquid domestic securities market,or small domestic market,Higher financing costs,Highly liquid and large markets,with wide international participation,Lower financing costs,Market Segmentation on Firms Securities and Cost of Capital,Segmented domestic securities,market that prices shares,according to domestic standards,Access to global securities market,that prices shares according to,international standards,Firms securities appeal only,to domestic investors,Firms securities appeal to,international portfolio investors,Firm-Specific Characteristics,Local Market Access,Global Market Access,With increasing volumes and complexities of international business,the study of international finance has become a specialized subject dealing with study of-,Foreign exchange markets,Exchange rates,MNC financial systems,Risk management,1 foreign exchange markets,It is the market in which currencies are bought&sold against each other.,No single physical location.,A world wide network of primarily banks connected through a telecommunication network.,Foreign Exchange Markets,BACKGROUND,Foreign Exchange markets come under Global Markets Division within Banks.It features are as follows:,Major international banks,Spot market and forward market,London is the largest centre,7/24 Market with daily Turnover of more than$5,200 Billions(BIS,2017),All currencies are primarily,valued against the USD dollar,:,USD 1=JPY 112.26(in this quote,the most common type,the USD is the,base,currency),EUR 1=USD 1.2594(in this quote the USD is the,variable,currency),2 Exchange rates,Another aspect covered in international finance is that of exchange rate&its determination,In case a fixed exchange rate system is prevalent,their each member country sells a fix value for its currency inventories of gold or US dollar,In case of floating exchange rate,it is the demand&supply of the currency which determines exchange rate,Demand&supply of currency dependent on factors like interest rate,monetary&fiscal policy,BOP etc.,How Factors Can Affect Exchange Rates,11,3 Multinational Corporation(MNCs),3 Multinational Corporation(MNCs),Multinationals are the single most largest players responsible for international business&international finance.,MNCs has numerous kinds of flows between the parent company,foreign business clients,MNCs take decision on the nature of fund movement,Important variables in context of MNCs,A mode of transfer of funds-decision regarding funds like dividends,loans,interest payment etc.,B planning for payment schedule.C managing the firm value,13,The Multinational Corporation,A multinational corporation is a company engaged in producing and selling goods or services in more than one country.Usually,it consists of a parent company located in the home country and several foreign subsidiaries.,A multinational is characterized more by attitude than the physical reality of an integrated system of marketing and production activities worldwide.,“Where in the world should we build our plants,sell our products,raise capital,and hire personnel?”i.e.a global perspective,rather than the perspective of the home country,where the parent is located.,14,Relevance of International Finance,Many of the problems of multinational firms are due to the use of different currencies used in different countries and the consequent need to exchange them.,There are political divisions as well as currency divisions between countries.,A financial manager has to decide how international events will affect a firm and what steps can be taken to exploit positive developments and insulate the firm from harmful ones.,15,Relevance of International Finance,Relevant variables are changes in,exchan