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Summer-2013
Master of
Business Administration- MBA Semester 4
IB0010–International
Financial Management-4 Credits
(Book ID:
1759)
Assignment
(60 Marks)
Note: Answer
all questions (with 300 to 400 words each) must be written within 6-8 pages.
Each Question carries 10 marks 6 X 10=60
Q1. Globalization is a process of
international integration that arises due to increasing human connectivity as
well as the interchange of products, ideas and other aspects of culture. Give
brief introduction of globalization and identify its advantages and
disadvantages.
Answer. Globalization refers to in which activities of
large number of business enterprises is carried out in many different locations
across national boundaries. It is much more than just importing or exporting
from one country to another. True globalization involves one firm procuring
form, manufacturing in, and selling in many different countries. There has been
an increasing trend in the world towards globalization is characterized by
trends such as:
Q2. Foreign exchange markets, where
money in one currency is exchanged for another. Write the history of foreign
exchange. Explain the fixed and floating rates and the advantages and
disadvantages of fixed rates system.
Answer. The exchange of goods and services
has been prevalent since thousands of years and a system of barter developed
over the years as man looked for ways to fulfill his needs for different
commodities and services. The initial exchange was limited to items of food and
gradually as man explored, invented and traveled to distant land it became
necessary to have a medium of exchange. This necessity led to the evolution of
money.
The Evolution of money
Primitive
societies used various commodities as a medium of exchange. These ranged from
grain, shells, tobacco, rice, salt, ivory to cattle, sheep, skins and slaves.
These were the
Q3. Swap is an agreement between two
or more parties to exchange sets of cash flows over a period in future. What do
you understand by swap? Explain its features, kinds of swap and various types
of interest rates swap.
Answer. A swap is an agreement between two parties
to exchange sequences of cash flows for a set period of time. Usually, at the
time the contract is initiated, at least one of these series of cash flows is
determined by a random or uncertain variable, such as an interest rate, foreign
exchange rate, equity price or commodity price. Conceptually, one may view a
swap as either a portfolio of forward contracts, or as a long position in one
bond coupled with a short position in another bond. This article will discuss
the two most common and most basic types of swaps:
Q4. International credit markets are
the forum where companies and governments can obtain credit. Bring out your
understanding on international credit markets and explain the two very
important aspects of international credit market. Refer and give one example.
Answer. International Credit
One of the
forms of the movement of monetary and material means in international economic
relations. It is based on the temporary provision of financial and commodity
resources by a creditor to a borrower on condition of repayment at a set time
and with interest. International credit is closely linked to the formation and
development of the world capitalist and world socialist economic systems. The
essence, forms, and functions of international credit are determined by the
socioeconomic conditions under which it is applied.
Q5. Cost of capital is the minimum
rate of return required by a firm on its investment in order to provide the
rate of return by its suppliers of capital. Describe the cost of capital across
countries.
Answer. The effective rate that a company pays on its current debt. This can be
measured in either before- or after-tax returns; however, because interest
expense is deductible, the after-tax cost is seen most often. This is one part
of the company's capital structure, which also includes the cost of equity. A
company will use various bonds, loans and other forms of debt, so this measure
is useful for giving an idea as to the overall rate being paid by the company
to use debt financing. The measure can also give investors an idea as to the
riskiness of the company compared to others, because riskier companies
generally have a higher cost of debt.
Q6. Explain the principles of
taxation and double taxation. Give some important points on tax havens and its
types.
Answer. Basic concepts by which a government
is meant to be guided in designing and implementing an equitable taxation
regime. These include:
(1)
Adequacy: taxes should be just-enough to generate revenue required for
provision of essential public services.
(2) Broad
Basing: taxes should be spread over as wide as possible section of the
population, or sectors of economy, to minimize the individual tax burden.
(3)
Compatibility: taxes should be coordinated to ensure tax neutrality and overall
objectives of good governance.
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