IB0010-International Financial Management

Winter-2015

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Master of Business Administration- MBA Semester 3

IB0010-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. In foreign exchange market many types of transactions take place. Discuss the meaning and role of forward, future and options market.

Answer. Forward market:  In the forward market, contracts are made to buy and sell currencies for future delivery, say, after a fortnight, one month, two months and so on. The rate of exchange for the transaction is agreed upon on the very day the deal is finalized. The rate of exchange for the transaction is agreed upon on the very day the deal is finalized. The forward rates with varying maturity are quoted in the newspapers and those rates form the basis of the contract. Both parties have to abide by the contract at the exchange rate mentioned therein irrespective of whether the spot rate on the maturity date resembles

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.

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.

Q5. There is a country risk involved every time an MNC operates in a different country. Discuss the two approaches to country risk management.

Answer. There are two approaches to country risk management.

1. Defensive approach: In this approach, the company tries to protect its interest by finding those aspects of the company that are beyond the reach of the host government. This reduces the firm’s dependence on the host country and the government of the host country. The important strategies in the functional areas of the company are discussed as follows:

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

Winter-2015

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

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

09882243490