UNIVERSITI UTARA MALAYSIA

COLLEGE OF BUSINES
BWFF5043 INTERNATIONAL FINANCIAL MANAGEMNT
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COURSE SYNOPSIS
The course provides a brief overview of the international financial management function.
Then, it explores the international financial environment that includes, among others, the
international monetary system, the foreign exchange market, as well as the currency futures
and option markets. The course also discusses the factors that determine exchange rate
changes, including the underpinning theories (international parity relationships). Following
these, the course emphasises the management of foreign exchange risks. Finally, it focuses
on the key components of multinational corporate finance, more specifically, cost of capital,
capital structure, capital budgeting, and working capital management. The course ends with a
discussion on international trade finance.
COURSE OBJECTIVES
Students are expected to:
1. comprehend the various international financial markets; theories that underpin, and
factors that influence, exchange rates; issues in financing international trade; as well
as the various international financial management tasks.
2. appreciate the types of foreign exchange risks faced by a business; and the techniques
and strategies that can be used to manage those risks.
3. value the complexities for a multinational company in making decisions related to the
cost of capital and capital structure, capital budgeting, as well as working capital.
COURSE LEARNING OUTCOMES
At the end of this course, students will be able to:
1. explain international financial management, features of the foreign exchange market
and other international financial markets, characteristics of currency derivatives, and
the types of foreign exchange risks, issues and strategies in international trade finance
(C2, P2, A2).
2. illustrate how relevant factors influence exchange rates, and relevant theories help
explain exchange rates (C3, P3, A2).
3. analyse problems of locational arbitrage, covered interest arbitrage, speculation with
currency derivatives, hedging or managing foreign exchange risks (C4, P3, A3).
4. evaluate a multinational companys decisions on cost of capital and capital structure,
capital budgeting, and working capital (C6, P3, A4).

REFERENCES
Madura, J. (2012). International Corporate Financet. South-Western, Cengage Learning.
COURSE CONTENT
1. INTRODUCTION
International financial management
The international monetary system
Foreign exchange market
International financial markets
2. EXCHANGE RATE DETERMINATION
Exchange rate equilibrium
Influence of inflation, interest rate & income level
Government influence
Expectations & interactions
3. INTERNATIONAL PARITY RELATIONSHIPS
Interest rate parity (IRP)
Purchasing power parity (PPP)
Fisher effect (FE)
International Fisher effect (IFE)
Forward rate parity (FRP)
4. CURRENCY DERIVATIVES
Currency forward
Currency futures
Currency option
5. MEASURING CURRENCY EXPOSURES
Relevance of currency exposure
Types of currency exposure
Measuring transaction exposure
Measuring economic exposure
Determinants of translation exposure

6. MANAGING TRANSACTION EXPOSURE

Contractual hedging techniques
Limitations of hedging
Alternative hedging methods
7. MANAGING ECONOMIC AND TRANSLATION EXPOSURE
Strategies to manage economic exposure
Hedging translation exposure & its limitations
8. MULTINATIONAL CAPITAL BUDGETING
Subsidiary versus parent perspective
MNC capital budgeting complexity
MNC capital budgeting analysis
Sensitivity analyses
Risk assessment & adjustment
9. MULTINATIONAL COST OF CAPITAL AND CAPITAL STRUCTURE
Cost of capital for MNCs
Cost of capital across countries
Cost of capital to assess foreign projects
MNC capital structure decision
Parent & subsidiary financing decisions
Foreign subsidiary capital structure
10. MULTINATIONAL WORKING CAPITAL MANAGEMENT
MNC working capital complexity
Strategies to optimise cash flow
Investing excess cash
11. INTERNATIONAL TRADE FINANCE
International trade payment methods
International trade financing methods