IB0010-International Financial Management

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Master of Business Administration- MBA Semester 3
IB0010-International Financial Management-4 Credits
(Book ID: B1759)
Assignment (60 Marks)
Note: Answer all questions must be written within 300 to 400 words each. Each Question carries 10
marks 6 X 10=60
Q1. Discuss the goals of international financial management.
Answer. International Financial Management is a well known term in today’s world and it is also known as
international finance. It means financial management in an international business environment. It is
different because of different currency of different countries, dissimilar political situations, imperfect
markets, diversified opportunity sets. A business organization is organic in nature, and its successful
growth depends on the financial efficiencies of operations and strategies. Therefore, the primary goals of
financial management dwell
Q2. The key component of the financial system is the money market that acts as a fulcrum of monetary
Write down the important points under each category mentioned below.
a) Functions performed by money market
b) International interest rates
c) Standardized Global Market regulations.
Answer. a) Functions performed by money market
1. To maintain monetary equilibrium. It means to keep a balance between the demand for and supply of
money for short term monetary transactions.
2. To promote economic growth. Money market can do this by making funds available to various units in
the economy such as agriculture, small scale industries, etc.
3. To provide help to Trade and Industry. Money market provides adequate finance to trade and industry.
Similarly it also provides facility of discounting bills of exchange for trade and industry.
Q3. Thousands of years back the concept of bartering between parties was prevalent, when the concept
of money had not evolved. Explain on counter trade with examples.
Answer. Trading between nations has been happening since time began. In ancient time nations traded
silk, spices, cloth and animals of all kinds. Today nation trade food items, defense equipment, metals,
electronics etc. The products might have changed but the basic concept is still the same as the underlining
need which brings together two nations in a trade relationship still exists. One such method of trading
between nations is called counter trade. Counter trade is an import / export relationship between nations
or large companies in which good and/or services are exchanged for goods and services instead of money.
In some cases monetary evaluations are
Q4. There are different techniques of exposure management. One is the Managing Transaction Exposure
and the other one is the managing operating exposure. So you have to explain on both Managing
Transaction Exposure and Managing Operating Exposure.
Answer. Transaction Exposure
The risk, faced by companies involved in international trade, those currency exchange rates will change
after the companies have already entered into financial obligations. Such exposure to fluctuating exchange
rates can lead to major losses for firms.
Transaction Exposure Management
A company engaging in cross-currency transactions can protect against transaction exposure by hedging.
The company can protect against the transaction risk by purchasing foreign currency, by using currency
swaps, by using currency futures, or by
Q5. Every firm is going on concern, whether domestic or MNC.
Explain the techniques of capital budgeting and the steps to determine cash flows.
Answer. Capital investments are long-term investments in which the assets involved have useful lives of
multiple years. For example, constructing a new production facility and investing in machinery and
equipment are capital investments. Capital budgeting is a method of estimating the financial viability of a
capital investment over the life of the investment.
Unlike some other types of investment analysis, capital budgeting focuses on cash flows rather than
profits. Capital budgeting involves identifying the cash in flows and cash out flows rather than accounting
revenues and expenses flowing from the
Q6. Write short note on:
a. American Depository Receipts (ADR)
b. Portfolio
Answer. a. American Depository Receipts (ADR)
An American depositary receipt (ADR and sometimes spelled depository) is a negotiable security that
represents securities of a non-U.S. company that trades in the U.S. financial markets.
Shares of many non-U.S. companies trade on U.S. stock exchanges through ADRs, which are denominated
and pay dividends in U.S. dollars and may be traded like regular shares of stock. ADRs are also traded
during U.S. trading hours, through U.S. broker-dealers. They simplify investing in foreign securities by
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