MF0015-International Financial Management

Spring-2016

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Master of Business Administration- MBA Semester 4

MF0015-International Financial Management

(Book ID: B1759)

Assignment (60 Marks)

Note: Answer all questions must be written within 300 to 400 words each. Each Question carries 10 marks 6 X 10=60

Q1. Discuss the goals of international financial management.

Answer. International Financial Management is a well known term in today’s world and it is also known as international finance. It means financial management in an international business environment. It is different because of different currency of different countries, dissimilar political situations, imperfect markets, diversified opportunity sets. A business organization is organic in nature, and its successful growth depends on the financial efficiencies of operations and strategies. Therefore, the primary goals of financial management dwell on both short-term and long-term activities that seek to maximize value creation from scarce financial resources.

Q2. The key component of the financial system is the money market that acts as a fulcrum of monetary operations.

Write down the important points under each category mentioned below.

a) Functions performed by money market

b) International interest rates

c) Standardized Global Market regulations.

Answer. a) Functions performed by money market

1. To maintain monetary equilibrium. It means to keep a balance between the demand for and supply of money for short term monetary transactions.

2. To promote economic growth. Money market can do this by making funds available to various units in the economy such as agriculture, small scale industries, etc.

3. To provide help to Trade and Industry. Money market provides adequate finance to trade and industry. Similarly it also provides facility of discounting bills of exchange for trade and industry.

Q3. Thousands of years back the concept of bartering between parties was prevalent, when the concept of money had not evolved. Explain on counter trade with examples.

Answer. Trading between nations has been happening since time began. In ancient time nations traded silk, spices, cloth and animals of all kinds. Today nation trade food items, defense equipment, metals, electronics etc. The products might have changed but the basic concept is still the same as the underlining need which brings together two nations in a trade relationship still exists. One such method of trading between nations is called counter trade. Counter trade is an import / export relationship between nations or large companies in which good and/or services are exchanged for goods and services instead of money. In some cases monetary evaluations are made for accounting purposes.

Q4. There are different techniques of exposure management. One is the Managing Transaction Exposure and the other one is the managing operating exposure. So you have to explain on both Managing Transaction Exposure and Managing Operating Exposure.

Answer. Transaction Exposure

The risk, faced by companies involved in international trade, those currency exchange rates will change after the companies have already entered into financial obligations. Such exposure to fluctuating exchange rates can lead to major losses for firms.

Transaction Exposure Management

A company engaging in cross-currency transactions can protect against transaction exposure by hedging. The company can protect against the transaction risk by purchasing foreign currency, by using currency swaps, by using currency futures, or by using a combination of these hedging techniques. Any one of these techniques can be used to fix the value of the cross-currency contract in advance of its settlement.

Q5. Every firm is going on concern, whether domestic or MNC.

Explain the techniques of capital budgeting and the steps to determine cash flows.

Answer. Capital investments are long-term investments in which the assets involved have useful lives of multiple years. For example, constructing a new production facility and investing in machinery and equipment are capital investments. Capital budgeting is a method of estimating the financial viability of a capital investment over the life of the investment.

Unlike some other types of investment analysis, capital budgeting focuses on cash flows rather than profits. Capital budgeting involves identifying the cash in flows and cash out flows rather than accounting revenues and expenses flowing from the investment. For example, non-expense items like debt principal payments are included in capital budgeting because they are cash flow transactions. Conversely, non-cash

Q6. Write short note on:

a. American Depository Receipts (ADR)

b. Portfolio

Answer. a. American Depository Receipts (ADR)

An American depositary receipt (ADR and sometimes spelled depository) is a negotiable security that represents securities of a non-U.S. company that trades in the U.S. financial markets.

Shares of many non-U.S. companies trade on U.S. stock exchanges through ADRs, which are denominated and pay dividends in U.S. dollars and may be traded like regular shares of stock. ADRs are also traded during U.S. trading hours, through U.S. broker-dealers. They simplify investing in foreign securities by having the depositary bank "manage all custody, currency and local taxes issues"

Spring-2016

Get solved assignments at nominal price of Rs.125 each.

Mail us at: subjects4u@gmail.com or contact at

09882243490