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Overview of International Financial Management

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Overview of International Financial Management
Overview of International Financial Management

Overview of International Financial Management

In this post we will discuss the evolution of international financial management and also distinguish between Domestic and international financial management. e term Financial Management refers to the proper maintenance of all monetary transactions of the organisation.

It also means recording of transactions in a standard manner that will show the financial position and performance of the organisation. Financial Management can be categorised into domestic and international financial management.

Domestic financial management refers to managing financial services within the country International financial management refers to managing and sharing finance between the countries.

Overview of International Financial Management

Evolution

International Financial Management (IFM) came into existence when the countries all over the world started opening their doors to each other. This phenomenon is also called liberalisation. Since the end of the Second World War, the integration in terms of foreign activities has grown substantially Firms of all types are now opting to operate their business and deploy their resources abroad However, differences between countries have persisted giving rise to the prevalence of market imperfections.

As a result, the fundamental financial decisions have now advanced to cross-border complexities. The choices to be made with respect to investment, capital raise, acquisition activity, restructuring as well as various aspects of financial policy requires financial considerations Whenever decisions are taken the managers must analyse difference in tax rules country risk factors, exchange rates and variation in legal rules. IFM has four distinct modules as follows.

Currencies and asset prices

The basic mechanisms of exchange rates, assets prices in global markets and currencies that influence stock prices are explained in his module.

Multinational financial decision making

The decisions of multinational firms pertaining to capital structure, tax optimisation and risk management are clarified.

In addition, this module covers the following aspects:
  • The way in which the firms take advantage of subsidiaries around the world
  • The association of firms with local firms.
  • The exposure of firms to the trade rates.
  • The tax considerations feature into internal financial decision making.
Cross-border valuation and financing –

The financial decisions and valuation techniques to be modified in a cross-border setting is covered in this module.

in addition, this module covers the following aspects:
  • The consideration on the price of capital around the world.
  • The assessment of investments in order to raise the markets.
  • The profit made by the firms through their financing and investment decisions as a result of market imperfection.

Institutions and finance

The inconsistent formal and informal institutional arrangements will result in a major impact on financial decision making. It focuses on the differences in legal rules, particularly variation in the legal protection of creditors and shareholders affecting investment and reforming decisions

In addition, the emphasis on the significance of informal institutional arrangements and relationship building, emerging markets using cases on merger and acquisition is also covered.

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