INTERNATIONAL

FINANCIAL
MANAGEMENT
PARVESH AGHI
The essence of international financial management

IFM is a popular concept

which means management of
finance in an international
business environment, it
implies, doing of trade and
making money through the
exchange of foreign currency.
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The international financial
activities help the
organizations to connect with
international dealings with
overseas business partners-
customers, suppliers, lenders.

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The main objective of international financial
management is to maximise shareholder wealth.

Adam Smith wrote in his famous title, “Wealth of

Nations” that if a foreign country can supply us with a
commodity Cheaper than we ourselves can make it,
better buy it of them with some part of the produce of
our own in which we have some advantage.

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Contents of IFM
Foreign Sourcing
Exchange Capital in
Markets Global Markets

International
Financial Synthesis
Management

Managing Foreign
FOREX Investment
Exposure Decisions
Key Issues of International Financial Management

Foreign
Political risk
exchange risk

Expanded
Market
opportunity
imperfections
sets
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Foreign exchange risk
In a domestic economy this risk is generally ignored
because a single national currency serves as the
main medium of exchange within a country.
However, when different national currencies are
exchanged, there is definite risk of volatility in
foreign exchange rates.
Variability of exchange rates is widely regarded as
the most serious international financial problem
facing policymakers and corporate managers.

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Foreign exchange risk

IFM deals with exchange risk.

Appreciation or devaluation of
a currency may have an
adverse effect on a company’s
product pricing, input cost and
financial state of affairs.

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Political risk

It is risk of loss (or gain) from

unforeseen government action or
other events of political character,
such as acts of terrorism.
An unexpected overturn of the
government may jeopardize
existing negotiated contract.

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Market imperfections

The world markets are highly

imperfect, in the sense that a variety
of barriers still hamper free
movements of people, goods, services,
and capital across national boundaries.
Trade barriers and tax incentives may
affect location of production.

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Expanded opportunity sets
When firms go global, they get benefited
from the expanded opportunities available
globally. They can locate production in any
country or region to maximize their
performance and raise funds in any capital
market where the cost of capital is the
lowest. They can also gain from greater
economies of scale when tangible
and intangible assets are deployed on a
global basis..

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TOPICS TO COVERED IMF
International International International
Capital Sources of Working Capital
Budgeting Finance Management

Foreign
Exchange
Management

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Thank you