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Master of Business Administration
Paper Code: MB FM– 203
Paper Title: International
Finance Management
Q. 1. Short answer type questions: Limit 100 - 150
(i) What do you understand by balance of
payment?
Answer: Balance Of
Payment (BOP) is a statement which records all the monetary transactions made
between residents of a country and the rest of the world during any given
period. This statement includes all the transactions made by/to individuals,
corporates and the government and helps in monitoring the flow of funds to
develop the economy. When all the elements are correctly included in the BOP,
it should sum up to zero in a perfect
(ii) Define any five factors which influence
exchange rate.
Answer: 1. Inflation rates
Inflation rates impact a country’s currency value.
A low inflation rate typically exhibits a rising currency value, as its
purchasing power increases relative to other currencies.
2.
Interest rates
Exchange rates, interest rates and inflation
(iii)
Give five differences between centralized versus decentralized cash
management
Answer:
Centralization/decentralization refers to how much decision-making authority
has been delegated to lower management levels. Few organizations could function
effectively if all decisions were made by a select group of top managers, nor
could they do so if all decisions were delegated to the lowest levels of the
organization.
(iv)
Give five differences between forward and future contract?
Answer: The fundamental difference between futures
and forwards is that futures are traded on exchanges and forwards trade OTC.
The difference in trading venues gives rise to notable differences in the two
instruments:
Futures are
standardized instruments transacted through brokerage firms that hold a
"seat" on the exchange that trades that particular contract. The
terms of a futures contract - including delivery places and dates, volume,
technical specifications, and trading and credit procedures - are standardized
for each type of contract. Like
(v)
What do you understand by translation espouser?
Answer: Translation exposure is a kind of
accounting risk that arises due to fluctuations in currency exchange rates. The
assets, liabilities, equities, and earnings of a subsidiary of a multinational
company are usually denominated in the currency of the country it is situated
in. If the parent company is situated in a country with a different currency,
the values of the holdings of each subsidiary need to be converted into the
currency of the home country.
Such conversion can lead to certain
(vi)
What do you understand by international finance management?
Answer: International financial management, also
known as international finance, is a well-known term in today’s world. It
simply means financial management in an international business environment. It
is different from financial management because of the different factors
involved like currency, political situations, imperfect markets, and
diversified opportunity sets.
Objectives of International
(vii)
“Explain the concept of Interest Rate parity theorems.
Answer: The interest rate parity (IRP) is a theory
regarding the relationship between the spot exchange rate and the expected spot
rate or forward exchange rate of two currencies, based on interest rates. The
theory holds that the forward exchange rate should be equal to the spot
currency exchange rate times the interest rate of the home country, divided by
the interest rate of the foreign country.
As with many other theories, the equation
(viii) Do you think cash management system effect
the borrowing decisions of a firm?
Answer: What is Cash Management?
Cash management, also
known as treasury management, is the process that involves collecting and
managing cash flows from the operating, investing, and financing activities of
a company. In business, it is a key aspect of an organization’s financial
stability.
(ix) Explain the concept of Arbitrage in
Foreign exchange market
Answer: “Arbitrage”
in Foreign Exchange Market
Arbitrage is the
process of a simultaneous sale and purchase of currencies in two or more
foreign exchange markets with an objective to make profits by capitalizing on
the exchange-rate differentials in various markets.
The arbitrage
(x)
Explain the concept of Internal and external techniques of risk.
Answer : Risk management is crucial to the success of
all software development, enhancement and maintenance projects. Risk management at its basest level is
avoiding problems that can be avoided and recognizing those that can’t be
avoided. In order to recognize and avoid problems, every project must take the
steps that need to be taken to consciously look outward and forward. The act of
risk management requires both
(Word limits 500)
Q. 2. Explain the process of issuing ADR and GDR?
Answer: What are American Depository Receipts (ADRs)?
American
Depository Receipts (ADRs) are a way of trading non-U.S. stocks on the U.S.
exchange. Through ADRs, Indian companies who are willing to raise funds from
the U.S. can do so by issuing shares on American Stock exchange.
Q. 3. Explain the Aspects of international cash
management?
Answer: Management of
short-term assets and liabilities - cash, investments, inventories, receivables
and payables, is an important part of finance manager's job. When it comes to
management of inventories, receivables etc. there is not much difference
between a multinational and domestic firms. Among these cash management can be
considerably more complex for multinational finns because of possibility of
raising and deploying cash in many currencies, many locations and profit
opportunities presented by imperfection in international money and foreign
exchange markets. In this unit, you
Q. 4. Discuss financial structure of foreign
subsidiaries of MNCs.
Answer: Once the decision about overall
debt-equity mix of an MNC is made, another critical issue that needs to be
addressed astutely by the MNC parent is to determine the debt-equity financing
mix for its offshore affiliates.
This calls upon the multinational finance manager
to evaluate the following three options:
i. Debt-equity mix of the subsidiary should conform
to the parent company norms.
Q. 5. Explain different type of International
financial market instruments.
Answer: Instruments are a means to
an end. You want to create music, you need a musical instrument. You want to
see videos, you need an audio-visual instrument/equipment. Similarly, you want
to make some money, you need to own a financial instrument. Financial
instruments are financial contracts between interested parties. They can be
created, traded, modified and settled. There are different types of financial
instruments, viz, currency, share and bond.
Types of Financial Instruments
Q. 6. Explain the concept of International
Monetary System?
Answer: International
monetary system refers to a system that forms rules and standards for
facilitating international trade among the nations.
It helps in
reallocating the capital and investment from one nation to another.
It is the global
network of the government
Dear
students get fully solved assignments
Send
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or
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