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transactio derivatives
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Another aspect covered in international finance
is that of exchange rate & its determination
In case a fixed exchange rate system is prevalent,
their each member country sells a fix value for its
currency inventories of gold or US dollar
In case of floating exchange rate, it is the
demand & supply of the currency which
determines exchange rate
Demand & supply of currency dependent on
factors like interest rate, monetary & fiscal policy,
BOP etc.
Two ways in which currency is quoted:
EXCHANGE RATE
QUOTATION N
direct indirect
quote variable quote variable
unit- home unit- foreign
currency currency
constant constant
unit- foreign unit- home
currency currency
multinationals are the single most largest
players responsible for international business &
international finance.
MNC has numerous kinds of flows between the
parent company , foreign business clients
MNC take decision on the nature of fund
movement
Important variables in context of MNCs –
A} mode of transfer of funds-decision regarding
funds like dividends, loans, interest payment etc.
B} planning for payment schedule.
C} managing the firm value
The earnings of firms engaged in
international business are subject to
fluctuations due to floating exchange rate.
International finance also studies the
techniques of preparing consolidated
financial statements of MNCs.
Like international audit, international
taxations etc.
Diminishing national boundaries
Efficientlyproduce products
in foreign markets
Broaden markets and diversify
Earn higher returns
Single market
Competitive advantage
New Technologies
Region FDI FDI
inflows Outflows