International financial Management

(BM 412)

Lecturer: Senior lecturer Mr. P.J. Jayathilaka

St. Name: K.K.J.R.Samarasekera
03/MS/072
4th year 1st semester

FACULTY OF MANAGEMENT STUDIES

DEPARTMENT OF BUSINESS MANAGEMENT
SABARAGAMUWA UNIVERSITY OF SRI LANKA
 Acknowledgement

I would like to give my

Humble thanks to my lecturer

Mr. P.J. Jayathilake,

For giving this opportunity

And his guidance to complete

This assignment successfully.

CONTENT
01. International financial management……………… …………..……… 01
1.1 International institutions………………………… …… ……… 02

02. Managing foreign exchange………………………………………………………………………………. 02

2.1 How do central banks manage exchange rates?......................... 02
2.2 Why exchange rates?.................................................. ………. 03
2.3 What determines the exchange rates? …………………… ……… 03
2.4Why exchange rates are important?.............................................. 04
2.5 Direct foreign exchange ……………………………………… ……… 05
2.6Market participants …………………………………………… …….. 06
2.7 Financial instruments ………………………………………………… 06
2.8 Main currencies used in foreign exchange:……………………… 08

03. Bills of exchange ………………………………………………………………. 09

3.1Characteristics of Bills of exchange …………………………………… 10

04. Forfeiting …………………………………………………………………………………………. 11

4.1How forfeiting Works in International Trade……………………… …12
4.2Documentary Requirements ………………………………………… 12
4.3 Benefits to Exporter …………………………………………………….. 13
4.4 Problem areas in forfeiting…………………………………………….. 14

05. Letter of credit …………………………………………………………………… 15

5.1Elements of a Letter of Credit……………………………… ……… 15

06. Factoring …………………………………………………………………………. 17

6.1 How factoring can benefit your business …………………………. 18
6.2 What are the main features of Factoring? …………… …………… 18

07 International financial markets………………………… ………………… 18

7.1 Types of financial markets …………………… ………………………. 19
7.2 What is their purpose? ………………………… ………………………. 20
7.3 Market participants ………………………………… …………………. 20

08 Direct foreign investment……………………………………………………….. 21

8.1 The case for free capital flows ……………………………………… 22

09 Conclusion ……………………………………………………………………………23

10 Reference …………………………………………… …………………………… 24

Introduction
Global financial system is facing a recession since last year. Developed countries like USA, UK,
and Singapore are the most affected countries from this situation. Not only develop countries but
also developing countries also has affected this indifferent manner. This is negative effect of
globalization and international trade. Increase of oil prices, bankrupt of banks, higher inflation,
unemployment and other negative effects has reduce countries growth rates.

For four straight years the global financial system has shown impressive resilience. During the
past six months in particular, markets have not been easy to intimidate. Global imbalances have
widened oil prices have raised strongly, hurricanes have struck, and turmoil has developed in
U.S. credit derivative markets. Political uncertainty has increased in some emerging economies.

Solid economic growth, combined with low inflation, low bond yields, and cheap credits, has
bolstered current financial stability. These are all essential factors that customarily sustain
international financial markets and have done so through this cycle.

This report is addressing international financial management, its institutions, their activities and
instruments used in international trade. Managing foreign exchange is very important and crucial
activity that central banks manage. Bills of exchange, factoring, factoring and letter of credit are
the main instruments that used in international trade. International trade has become more
complex ant technology oriented. Because of this above instruments play vital role in
international business.

Direct foreign investment is very important factor for any country to achieve development
objectives. All the governments are trying to get much more foreign investments. There are
positive and negative effects of direct foreign investments. There for governments should be
careful when getting foreign investments.

All the governments should manage international trade and international financial market well.
International financial management will really provide guidelines to manage international trade
and international market well.