International Finances

We live in a globalized world. Every country is dependent on another country by

some other means. Developed countries look for a cheap workforce from developing
countries, and developing countries look for services and products.
When a trade happens between two countries, as in this case, many factors come
into the picture and have to be considered during the execution of the business so
that no violation of regulation happens. For any economy, international finance is a
critical factor; the local government should accordingly execute the policies so that
the local players are not facing severe competition from the non-local players.
In this section, three articles about international finance will be shown, which will
lead us to see more countries, their economy, their forecast models, in a growing
world moving towards globalization, its importance is growing in magnitude. Every
day, the transaction between two countries for trade is scaling up with the
supporting factors.
It considers the world a single market instead of individual markets and carries out
the other procedures. For the same reason, the firms and corporations doing such
research include institutions like the International Monetary fund (IMF), International
Finance Corp (IFC), and the World Bank. Trade between two foreign countries is
one factor in developing the local economy and improving economies of scale
TITLE:  Predicting the Financial Failures of Manufacturing Companies
Trading in the Borsa Istanbul (2007-2019)
AREA: International finances
CITATION: Demirhan, H. and Sayilgan, G. (2021) Predicting the Financial Failures of Manufacturing
Companies Trading in the Borsa Istanbul (2007-2019). Journal of Financial Risk
Management, 10, 416-452. doi: 10.4236/jfrm.2021.104023.
URL:  https://www.scirp.org/journal/paperinformation.aspx?paperid=112858

Lexicon: (10 words)
SUMMARY  Predictive models forecasting companies’ financial failures have garnered
INTRODUCTION (1-3 sentences)  significant attention from researchers owing to the critical insights they can offer.
 Give a brief introduction to give Financial failure prediction (FFP) models play a vital role in mitigating high risks to
the neccessary
background to the study and 
state its purpose. 
 Why was the study conducted? 
 What was it about?
1. Failure (Fracaso): The omission of expected or required action.
2. Insights (Ideas): The capacity to gain an accurate and deep intuitive
understanding of a person or thing.
3. Likelihood (Probabilidad): The state or fact of something's being likely;
probability.
4. Assumptions (Suposiciones): A thing that is accepted as true or as certain
to happen, without proof.
5. Distress (Angustia): Extreme anxiety, sorrow, or pain.
6. Loan (Préstamo): A thing that is borrowed, especially a sum of money that
is expected to be paid back with interest.
7. Stakeholders (Interesados): A person with an interest or concern in
something, especially a business.
8. Damage (Daños): A sum of money claimed or awarded in compensation
for a loss or an injury.
9. Accuracy (Precisión): The quality or state of being correct or precise.
10. Flow (Flujo): A steady, continuous stream of something.
stakeholders and the national economy.
Financial failure is a broad term, which refers to a company’s inability to fulfill its
financial obligations. A company is contractually bound by its stakeholders
(financial institutions, tax administration, employees, shareholders, etc.) in a given
and predetermined time and amount. Financial failure stems from internal factors,
such as monetary, business, and operational risks, leading to insufficient revenue
and liquidity to cover expenses and service debt. Consequently, a company is
forced to cease its operations. However, such internal (firm-specific) risk factors
can be controlled if the management takes necessary measurements on time.

Therefore, developing and implementing financial failure models is critical to the

relevant stakeholders to control the damage. In this regard, the lenders can use
the models as “early warning systems” to reduce non-performing loan risks. In
addition, governments continuously encourage companies and financial
institutions to establish effective detection models to reduce the likelihood of
failure and minimize costs to the economy. In short, using a successful FFP model
can be instrumental in providing significant benefits to a wide range of individuals
and institutions and their respective stakeholders to ensure healthy economic
decisions and preventive action at an early stage.

  In the 1960s, Beaver (1966) was the first researcher to use a single statistical
PROCEDURES (3-5 sentences)   technique variable (univariate analysis) in his financial failure study. The author
  Describe the specifics of  tested one financial ratio out of thirty financial ratios each time on a rotational
what this study involved basis. He concluded that six financial ratios (independent variables) were more
 Who were the subjects?  relevant to construct univariate discriminant models. Out of six, the best financial
 What was measured?  ratio was the “cash flow to total debt ratio” with a 10% misclassification rate over
 What was being compared?  five years up to the failure.

Altman (1968) is one of the pioneers of multivariate statistical models in predicting

financial failure. He developed a better estimation model with financial ratios
using the multiple discriminant technique in his research. The author concentrated
on the business size equivalence of the companies included in the selection.

Scott (1981) calculated the ZETA values using the multiple discriminant analysis
and concluded that the ZETA model is the most discriminatory multidimensional
method for classifying successful and unsuccessful firms. The author also
concluded that the ZETA value is the most reliable since it gives the lowest
classification error. His study used stock market data and generally accepted
financial ratios as explanatory variables in the multiple discriminant analysis. More
than thirty financial institutions used a model developed with the same
independent variables in their credit risk assessment exercises.

Ohlson (1980) was one of the leading researchers who developed logistic
regression models to predict financial failure. He was critical of the multiple
discriminant analysis restrictive assumptions and the estimated results depending
on these assumptions. Ohlson estimated the parameters’ coefficients by applying
the maximum likelihood estimation method for the maximum failure prediction
accuracy. He observed that the logit regression method provides comparatively
high accuracy in predicting financial distress subject to data quality availability.

FINDINGS (3-5 sentences)  Liu (2004) found a significant relationship between companies’ failure rates and
 Discuss the major findings and  macroeconomic factors. The error correction model (ECM), a multiple-time series
results.  model based on quarterly data for 1966-1999 in the UK, was used in the
 How useful or significant is this?  calculation. Nominal interest rates, real profit rates, real loan amounts, and the
general price index were used as independent macroeconomic variables.
 What did the author say about it? 

Among the macroeconomic variables, it was observed that the nominal interest
rates were the critical factor in the companies’ financial distress. Hence, it was
recommended that authorities reduce companies’ failure rates by changing
interest rates as part of their monetary policy.

According to the research findings, an increase in firm-specific factors such as cash

ratio, shareholders’ equity, capital turnover rate, and net foreign exchange
position decreased the risk of financial failures. Conversely, a decrease in other
firm-specific factors such as current ratio and profit ratios increased the risk of
financial failures. It was also found that firm age and good corporate governance,
as well as the ease of doing business ranking and the dummy variable regarding
the influence of global financial crisis, are critical, independent variables in
explaining the risk of financial failures.
CONCLUSIONS (3-5 sentences)  This study aimed to develop and validate the FFP models utilizing financial ratios
 Summarize the researcher’s combined with several markets and macroeconomic variables for the Turkish
conclusions.  manufacturing corporates, which traded on the BIST between 2007 and 2019.
 What was the major outcome  Early prediction of a company’s financial failure with a reliable financial distress
model is beneficial for various corporate stakeholders, especially in global financial
 of the study?  and economic volatility.

Overall empirical results of FFP models for each group of companies were
significant at an alpha level of 0.05. Moreover, the hypothesis was tested at a 95%
confidence level (confidence interval).

In this research, the results of the FFP models display a reasonably high
classification accuracy and predictive power of three sets of variables (financial
ratios, market, and macroeconomic variables) in a logit model for quoted
companies in the developing country, Turkey.
What this article mentions is that they have based on a model to predict how a
PERSONAL COMMENTS (200-250 company can reach financial bankruptcy, which I find interesting because we could
words)  see it in our working life as a test of how much risk could have to have a company,
as we would not want the company to be in financial bankruptcy so this article
made me see how several people have improved prediction models of financial
 What did you learn from the  bankruptcy I am almost sure that we could use them in our country or at least a
study?  similar model, we could improve and adapt it to our needs, since it is a different
 How might you apply the inform financial system and all this has to do with the damages that a company could
ation in your have, the factors are different from those that a company in Mexico should
academic training?  consider so this article helped me to see that we should not only see the
 How this study relates to your possibilities of a company to operate but also the risk of bankruptcy over time,
field of preparation?  having to modify some things to make it work again, updating ourselves as time
goes by, we have to consider many factors according to the financial bankruptcy
prediction model, this helps all the interested parties to remain interested in
seeing the possibilities of bankruptcy of the company, to be able to reduce those
possibilities.
Student’s name:  ARTICLE Nº: 01
Fernanda Anayansi De León Ibarra
TITLE:  Application of Discriminant Analysis to Diagnose the Financial
Distress
AREA: International finances
CITATION: Soni, R. (2019) Application of Discriminant Analysis to Diagnose the Financial
Distress. Theoretical Economics Letters, 9, 1197-1209. doi: 10.4236/tel.2019.94077.
URL:  https://www.scirp.org/journal/paperinformation.aspx?paperid=92229

Lexicon: (10 words) 1. Edible (Comestible): Fit or suitable to be eaten.

2. Achieving (Lograr): Successfully bring about or reach (a desired objective,
level, or result) by effort, skill, or courage.
3. Manufacturer (Fabricante): A person or company that makes goods for sale.
4. Cope (Lidiar): (of a person) deal effectively with something difficult.
5. Turnover (Facturación): The amount of money taken by a business in a
particular period.
6. Forecasting (Previsión): Predict or estimate (a future event or trend).
7. Growth (Crecimiento): The process of increasing in physical size.
8. Distressed (Angustiado): Suffering from anxiety, sorrow, or pain.
9. Facing (Frente a): A layer of material covering part of a garment and
providing contrast, decoration, or strength.
10. Risk (Riesgo): A situation involving exposure to danger.

SUMMARY  Profit maximization and Stability of Growth is the main objective of most of the
INTRODUCTION (1-3 sentences)  organizations. Best Operational Support and Strong Financial Health required to
 Give a brief introduction to give  achieving these objectives the firm. The operational support means internal support
the neccessary system like material utilization, labour, effective utilization of funds etc. and external
background to the study and  support system like political, social and economic factors. Any mismatch in internal
state its purpose.  and external support system, results in Bankruptcy of the organization, these failure
 Why was the study conducted?  leads to heavy losses whether financial and non-financial distress.
 What was it about? Ruchi Soya established in 1986, has emerged as an integrated player, from farm to
fork with secured access to oil palm plantations in India and other key regions of the
world. Ruchi Soya Industries Limited is a leading manufacturer and India’s largest
marketer of healthier edible oils, Vanaspati, premium table spread, and bakery fats
and soya food. It was among the top five FMCG players in India. It is one of the
highest exporters of soya meal from India.

Edward Altman established a well-known model for bankruptcy prediction called

Altman Z score model. This model also called multiple discriminant analysis model
(MDA). He used 66 firms in his first study, half of which were bankrupted. He
compared bankrupted and non-bankrupted organizations. He selected five best fit
ratios among a large number of ratios for bankruptcy forecasting. The result showed
95% accuracy one year prior and 72% two year prior to failure. In 1983 Altman used
model for private organizations showed 93% accuracy rate one year prior and 73%
accuracy two years prior to failure.

  Green has used financial statements analysis using the ratio analysis as a testing
PROCEDURES (3-5 sentences)   method of financial health of reporting companies. Beaver studied that financial
 Describe the specifics of  ratio analysis is capable of predicting a firm’s performance. Collins used many
what this study involved different models of assessing bankruptcy in his study, but he found that other
 Who were the subjects?  models are good but Altman’s Z score model proves to be better one.
  What was measured?  Abdullah et al done a comparative analysis of three different methods of bankruptcy
 What was being compared?  on companies that are financially distressed firms in Malaysia and they found out
that the hazard model estimates were most accurate amongst all three methods
that was used with accuracy level of 94.9%. Bhunia and Mukhuti used Z-score model
on financial distressed Indian companies to predict the bankruptcy and found
results with 81% accuracy in the model.

Venkataramana, Ramakirishnaiah and Azash researched the bankruptcy prediction

using three different models using the data of cement companies in the Indian
market and found ratio analysis and Z score is best fit model. Pompe and Bilderbeek
observe predictive power of different financial ratios.

There are many studies has been done using Altman’s Z-score model of predicting
bankruptcy. But there are fewer studies in Indian context. This study uses Z score
model to show, how the ratios predict the financial distress and possibility of
bankruptcy of the company.

FINDINGS (3-5 sentences)  At the time of great depression, the incidences of default were increasing, one of
 Discuss the major findings and  the professors of Finance of the Leonard N. Stern School of Business of New York
results.  University, named Dr Edward I. Altman developed the Financial Model in 1967 to
 How useful or significant is this?  predict the likelihood of bankruptcy of the company which is named as Altman’s Z-
Score Model. Altman has used five financial ratios to predict a company’s probability
 What did the author say about it? 
of failure.

This model helps the organization to predict the probability of collapse within 2
years. For this, model Measure Company’s health with various financial ratios and
then Discriminant analysis used to calculate the Z score of the company. It is proven
to be very accurate to forecast bankruptcy in a wide variety of contexts and
markets. This study shows the accuracy of model 72% - 80% of predicting
bankruptcy.

Revised version of Altman’s Z-Score model has been released in 2012 that can be
used to evaluate both manufacturing & non-manufacturing firms & public &
privative companies in both US & non-US companies. Application of Z score is not
possible to every situation. This model is also used by investors to determine the
financial strength and credit risk of the organization before taking decision whether
to buy or sell a particular stock. The Altman Z-score is a linear combination of Ratios;
four ratios are using Service Firms and five are using Manufacturing firms.

CONCLUSIONS (3-5 sentences)  This study would be used to explain the application of Altman’s Z Score model. The
 Summarize the researcher’s objective was to investigate the accuracy of Altman’s models in predicting corporate
conclusions.  financial distress. It is recognized that the Altman’s model can be used in Ruchi soya
 What was the major outcom Industries Limited to forecast the possibility of bankruptcy.
e of the study? 
This company’s z score result in the year 2012 to 2015 have gray zone and after that
in the year 2016 and 2017 was in distress zone. It shows that company was facing
financial problems since long and management were not able to cope up with those
issues. The market value of the firm and the assets turnover ratio is significant in z
score model.

In addition to these results and findings, there are also some limitations present in
the study that must be considered while interpreting the results and conclusion.
 This study is only for one company and for last six years of data so the results and
findings of this study cannot be generalized over any other study with different
sample and time period. It is based on financial statement data; if data given is
wrong then analysis also proves to be wrong.
In this article we continue to see the bankruptcy prediction model but here we see
PERSONAL COMMENTS (200-250 many discoveries or modifications that were made by people involved in
words)  international finance but this model is Altman's Z score model, in this model many
tests were carried out that made many involved, researching several companies
 What did you learn from the stu testing the aforementioned model, perhaps this article will help me in the future to
dy?  be able to implement this model in some occasion in my own company as I would
 How might you apply the infor like, to be able to see all the factors on which I should focus, although I honestly
mation in your believe that it is a little more important to see how much chance a company has of
academic training?  being able to have a good amount of profit, but without a doubt it is also important
 How this study relates to your to see the risks that a company entails, or see how many companies have failed , in
field of preparation?  which they have failed so that we do not make the same mistakes because all this is
important, I feel that if you would help me in my working life in the future what I
have learned in this article but modifying a little what is seen in other countries to
what must be taken into account for a company to work.

Student’s name:  ARTICLE Nº: 02

Fernanda Anayansi De León Ibarra

TITLE:  Financial Internationalization and Financial Security Issues

AREA: International finances
CITATION: Han, R. (2018) Financial Internationalization and Financial Security Issues. Open Access
Library Journal, 5, 1-7. doi: 10.4236/oalib.1104874.
URL:  https://www.scirp.org/journal/paperinformation.aspx?paperid=87260

Lexicon: (10 words) 1. Entity (Entidad): A thing with distinct and independent existence.
2. Currencies (Monedas): A system of money in general use in a particular
country.
 3. Wave (Onda): Move one's hand to and fro in greeting or as a signal.
4. Debt (Deuda): Something, typically money, that is owed or due.
5. Mortgage (Hipoteca) A legal agreement by which a bank or other creditor
lends money at interest in exchange for taking title of the debtor's
property, with the condition that the conveyance of title becomes void
upon the payment of the debt.
6. Accession (Acceso): The attainment or acquisition of a position of rank or
power, typically that of monarch or president.
7. Vacuum (Vacío): A space entirely devoid of matter.
8. Steadily (Constantemente): In a regular and even manner.
9. Activeness (Actividad): The trait of being active; moving or acting rapidly
and energetically.
10. Enhance (Mejorar): Intensify, increase, or further improve the quality,
value, or extent of.

SUMMARY  Financial internationalization refers to the state and process of the financial
INTRODUCTION (1-3 sentences)  activity entity of an economy participating in the financial activities of another
 Give a brief introduction to give  economy across administrative divisions, or vice versa, the core of which is “the
the neccessary process and state of financial integration in the world”. The main performance
background to the study and  dimensions are capital movements, financial institutions, business, markets,
state its purpose.  regulation and the internationalization of currencies. Financial security is often
 Why was the study conducted?  intertwined with financial internationalization and is closely related to financial
 What was it about? sovereignty.

Since 1980, the wave of financial internationalization has swept the world. With
the globalization of finance becoming the main theme of the international
financial field, there have been many financial crises in the world. The continuous
crisis in 1980, the Latin American debt crisis, the 1990 Asian financial crisis, and
the 2010 US subprime mortgage crisis hit the world’s financial and economic
systems.

However, in contrast to China, since the accession to the WTO in 2001, the process
of financial internationalization has been greatly accelerated, but the financial
crisis has never erupted. The financial industry has increased its development
speed due to opening up. This makes us wonder why the relationship between
financial internationalization and financial security is exactly what it is. In the
future, China will be able to reduce financial risks and maintain financial security in
the process of promoting internationalization.

  The internationalization of the capital movement leads to uncertainty in the

PROCEDURES (3-5 sentences)   direction and scale of capital flows, which is a major hidden danger to the stability
 Describe the specifics of  of a country’s financial system. The internationalization of the capital movement
what this study involved provides a good institutional environment for the free entry and exit of capital.
 Who were the subjects?  This not only makes the transnational transfer of financial assets and currency
 What was measured?  substitution more convenient, but also increases the probability that a country’s
 What was being compared?  financial system will be attacked by international hot money.

The internationalization of a country’s financial market is mainly reflected in the

integrated development of domestic and international financial markets. The
overseas listing of state-owned enterprises affects the financial security of a
country. The large number of domestic high-quality enterprises listed overseas
 may lead to excessive internationalization of state-owned enterprises and
adversely affect national interests and financial security.

In the context of internationalization of financial regulation, there are many

hidden concerns about financial security. The internationalization of finance has
intensified the complexity of supervision, which is a severe test for a country’s
financial supervision ability. First of all, the diversification of financial instruments
and the cross-cutting of business brought about by financial internationalization
are likely to cause a regulatory vacuum for the traditional institutional supervision
system.

The internationalization of financial institutions mainly includes two aspects:

“walking in” and “going out” of domestic financial institutions for international
operation. On the one hand, the presence of foreign financial institutions may
enhance the fragility of a country’s financial system.

FINDINGS (3-5 sentences)  Financial internationalization has brought opportunities to China’s financial

 Discuss the major findings and  industry and economic development, and it has also brought about no small
results.  impact and problems that need to be seriously solved. As China’s financial
 How useful or significant is this?  internationalization deepens, its challenges and tests will become more severe. In
advancing the process of financial internationalization, China must proceed from
 What did the author say about it? 
its own reality, fully absorb foreign experience and lessons, and adhere to the
principle of activeness and stability. It should formulate and implement correct
strategies and strategies to avoid disadvantages, reduce or avoid the impact of
international finance, and ensure financial security

With the development of reform and opening up, China has liberalized some
financial markets and successfully achieved exchange rate consolidation. In
December 1996, the convertibility under the RMB current account was realized,
and a key step in financial internationalization was taken.

At present, the international financial system and the international financial

system are seriously unsuited to the needs of financial internationalization. In the
prevention and resolution of the international financial crisis, there is no
corresponding security and stability mechanism and effective means. Therefore,
international cooperation and coordination has become a major channel for
resolving the international financial crisis.
CONCLUSIONS (3-5 sentences)  Financial internationalization has become an irreversible trend and feature of
 Summarize the researcher’s world financial development. If China wants to develop, it must devote itself to the
conclusions.  wave of financial internationalization and exchange the smallest financial security
 What was the major outcome  costs for the greatest financial benefits. Therefore, China should further
strengthen international exchanges and cooperation, promote the reform and
of the study? 
improvement of the international financial system and the international financial
system, standardize the capital market, implement a gradual financial
internationalization strategy, and steadily promote financial freedom by
establishing a complete financial management and supervision system, to avoid
the risks of financial internationalization and strengthen financial security.
What is mentioned in this article is about the internationalization of financial
PERSONAL COMMENTS (200-250 institutions, which leads us to see the flow of capital of a country, which affects
words)  the financial system of each country, which I find interesting since in this semester
we have the subject of the Mexican financial system, so this article can help me to
apply it in my work and knowledge about the subject that I have been studying,
 What did you learn from the  which has also helped me to understand what this article is about, which has
study?  increased my the knowledge that I have acquired throughout the semester, apart
 How might you apply the inform from the fact that it can be useful for my working life in the future, since as a
ation in your future accountant it is important to take into account the financial system of the
academic training?  country in which this profession is practiced since it has A lot to see, understanding
 How this study relates to your the movements of each country, how the national currency, banks, brokerage
field of preparation?  houses, etc. are managed.

So this article helps me to understand how many companies are afraid or

uncertain of getting involved in the financial system of each country, it also helps
me to understand how to possibly involve my future company in the financial
system of my country in the future.

Student’s name:  ARTICLE Nº: 03

Fernanda Anayansi De León Ibarra
 Individual conclusion

In this inclusive learning product, what I did was investigate information articles
aimed at our career to be able to get involved in issues related to my areas of
interest, which I found very interesting since I saw information from different
countries, which leads me to understand that we have similar or different things in
our countries and our economy, each one took a section of interest, we helped
each other with our doubts to be able to comply with what was requested in this
PIA, we included a lot of what was seen in the semester, not only in English
They have also been involved in this work in other matters, it was very enjoyable to
work as a team for this work, the truth was not very complicated, what was really
interesting was being able to understand the articles to be able to give our personal
opinion, but everything could be resolved.
Despite not being in contact with the team for a long time, it was what was
necessary to be able to fulfill everything that was asked of us, we asked ourselves
all our doubts since that was what teamwork was about, we also took into account
all the recommendations that we received.
Fernanda Anayansi De León Ibarra