CHAPTER
7
Foreign Exchange and
International Finance
7-1 Money Systems Around the World
7-2 Foreign Exchange And Currency
Controls
7-3 Currency Transactions Between
Nations
© 2011 South-Western | Cengage Learning
CHAPTER
INTERNATIONAL BUSINESS, 4e
7
LESSON 7-1
Money Systems Around the World
GOALS
 Explain the role of money and
currency systems in international
business.
 Identify factors that affect the value
of currency.
© 2011 South-Western | Cengage Learning
SLIDE 2
CHAPTER
INTERNATIONAL BUSINESS, 4e
7
Money and Currency Systems
 What is money?
 Acceptability
 Scarcity
 Durability
 Divisibility
 Portability
 Why is money used?
 Medium of exchange
 Measure of value
 Store of value
© 2011 South-Western | Cengage Learning
SLIDE 3
CHAPTER
INTERNATIONAL BUSINESS, 4e
7
Foreign Exchange
 Balance of payments
 Economic conditions
 Money supply and demand
 Risk
 Inflation
 Political Stability
© 2011 South-Western | Cengage Learning
SLIDE 4
CHAPTER
INTERNATIONAL BUSINESS, 4e
7
LESSON 7-2
Foreign Exchange and Currency Controls
GOALS
 Discuss foreign exchange activities.
 Describe the main activities of the
World Bank and the International
Monetary Fund.
© 2011 South-Western | Cengage Learning
SLIDE 5
CHAPTER
INTERNATIONAL BUSINESS, 4e
7
Foreign Exchange Activities
 Changing exchange rates
 The foreign exchange market
 Foreign exchange controls
© 2011 South-Western | Cengage Learning
SLIDE 6
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INTERNATIONAL BUSINESS, 4e
7
Japanese Yen Per U.S. Dollar
© 2011 South-Western | Cengage Learning
SLIDE 7
CHAPTER
INTERNATIONAL BUSINESS, 4e
7
International Financial Agencies
 The World Bank
 International Monetary Fund (IMF)
 Analyze economic situations
 Suggest economic policies
 Provide loans
© 2011 South-Western | Cengage Learning
SLIDE 8
CHAPTER
INTERNATIONAL BUSINESS, 4e
7
LESSON 7-3
Currency Transactions Between Nations
GOALS
 Discuss payment methods and
financial sources for international
business transactions.
 Explain other payment methods
and financial documents used in
international trade.
© 2011 South-Western | Cengage Learning
SLIDE 9
CHAPTER
INTERNATIONAL BUSINESS, 4e
7
International Financial Transactions
 Foreign trade payment methods
 Cash in advance
 Letter of credit
 Sale on account
 Sources of international financing
 Short-term financing
 Long-term financing
© 2011 South-Western | Cengage Learning
SLIDE 10
CHAPTER
INTERNATIONAL BUSINESS, 4e
7
Other Payment Methods and
Financial Documents
 Promissory note
 Bill of exchange
 Electronic funds transfer (EFT)
 Commercial invoice
 Insurance certificate
© 2011 South-Western | Cengage Learning
SLIDE 11
CHAPTER
INTERNATIONAL BUSINESS, 4e
7
A Commercial Invoice
© 2011 South-Western | Cengage Learning
SLIDE 12