Program Semester Subject Code Subject Name Unit Number

: MBA : IV : MB0053 : International Business Management : 07

Unit Title
Lecture Number Lecture Title

: International Financial Management (IFM)

: 07 : International Financial Management (IFM)

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Unit-7 International Financial Management (IFM)

International Financial Management (IFM)

Objectives
The objectives of this lecture are to: Differentiate between domestic and international financial

management
Describe the various components involved in international financial management Discuss the scope of international financial management

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Unit-7 International Financial Management (IFM)

Lecture Outline

Introduction

Overview of IFM
Components of IFM Scope of IFM Summary Check Your Learning Activity

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Unit-7 International Financial Management (IFM)

Introduction

The maintenance of the monetary transactions of an organisation is

financial management.
There are two branches of financial management domestic and international financial management. The working capital is associated with the management of current assets and current liabilities.

Taxation plays a vital role in the worldwide operation of firms.

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Unit-7 International Financial Management (IFM)

Overview of IFM
IFM modules

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Unit-7 International Financial Management (IFM)

Overview of IFM Contd..

Domestic vs. international financial management
Managing finance in international business is considerably different from managing finance in domestic business. The factors that distinguish international and domestic financial management are:

Foreign exchange risk Political risk Market imperfection Enhanced opportunity set

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Unit-7 International Financial Management (IFM)

Components of IFM
Components of IFM

Foreign exchange markets

Foreign currency derivatives

Components of IFM

International financial markets

International monetary systems

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Unit-7 International Financial Management (IFM)

Scope of IFM
Management of working capital
The objective of working capital management is to ensure that organisations:

Maintain their operations normally Have adequate cash flow to satisfy short term debt and operational expenses for the future.

The two types of working capital policies are: Liquidity policy Profitability policy

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Unit-7 International Financial Management (IFM)

Scope of IFM Contd..

Financing decisions
The following factors are considered while raising the capital:

Flexibility Risk Income Control Time

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Unit-7 International Financial Management (IFM)

Scope of IFM Contd..

Taxation
Taxation is the core for a number of financing decisions such as:

International investment decisions International working capital decisions Fund raising decisions Decisions related to dividend and other payments

Basis of international tax system

Tax neutrality

Tax equity
Avoidance of double taxation
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Unit-7 International Financial Management (IFM)

Summary
The objective of IFM is to maximise the value of an organisation.

Foreign exchange market, foreign currency derivatives,

international financial markets and international monetary systems are essential in international financial management.

An estimation of working capital is made after understanding the nature of production.

The factors considered in financing decision are flexibility, risk, income, control and time.

The basis of international tax system are tax neutrality, tax equity and avoidance of double taxation.
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Unit-7 International Financial Management (IFM)

Check Your Learning

1.

Which IFM module covers the financial decisions and

valuation techniques to be modified in a cross-border setting?

Ans: Cross-border valuation and financing

2.

What are the basis of international tax system?

Tax neutrality Tax equity

Ans: The basis of international tax system are:

Avoidance of double taxation

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Unit-7 International Financial Management (IFM)

Activity

Visit the nearest business organisation and find out how a financial
manager manages the working capital of the business.

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