IB0010 & INTERNATIONAL FINANCIAL MANAGEMENT

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ASSIGNMENT

DRIVE	SPRING 2015
PROGRAM	MBADS – (SEM 4/SEM 6) / MBAN2 / MBAFLEX – (SEM 4) / PGDFMN – (SEM 2)
SUBJECT CODE & NAME	IB0010 & INTERNATIONAL FINANCIAL MANAGEMENT
SEMESTER	4
BK ID	B1759
CREDITS	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme

1. Discuss the goals of international financial management

Answer:  All businesses aim to maximize their profits, minimize their expenses and maximize their market share. Here is a look at each of these goals.

Maximize Profits A company's most important goal is to make money and keep it. Profit-margin ratios are one way to measure how much money a company squeezes from its total revenue or total sales.

2. In foreign exchange market many types of transactions take place. Discuss the meaning and role of forward, future and options market.

Answer :  A forward contract is a private agreement between two parties giving the buyer an obligation to purchase an asset (and the seller an obligation to sell an asset) at a set price at a future point in time.

The assets often traded in forward contracts include commodities like grain, precious metals, electricity, oil, beef, orange juice, and natural gas, but foreign currencies and financial instruments are also part of today's forward markets.

3 Thousands of years back the concept of bartering between parties was prevalent, when the concept of money had not evolved. Explain  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 made for accounting purposes.

4 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’ is a risk which is faced by the organizations which are involved in international trade especially when they enter into the financial obligations. The risk which is faced by the companies is about the changes occurring in the currency exchange rates after they have entered into trade obligations in the international market. Many companies which face such a situation adopt hedging strategy which allows them to get locked in an exchange rate by using forward rates to evade the exposure of companies to risk. ‘Transaction Exposure’ is also called ‘Contractual Exposure’ which is about the sensitivity of the currency value of assets and liabilities that get liquidated considering the

5. There is a country risk involved every time an MNC operates in a different country. Discuss the two approaches to country risk management.

Answer :  Uncertainty can’t be eliminated from the business environment, but as this author points out, it can be managed by transforming it into planned uncertainty.

Evaluating country risks is a crucial exercise when choosing sites for international business, particularly if investment is to be undertaken. Certain risks can be managed through insurance, hedging and other types of financial planning, but other risks cannot be controlled through such financial mechanisms. Some of these latter

6 Write short note on:

A) American Depository Receipts(ADR)

Answer : An American Depository Receipt, or ADR, is a security issued by a U.S. depository bank to domestic buyers as a substitute for direct ownership of stock in foreign companies. An ADR can represent one or more shares, or a fraction of a share, of a non-U.S. company. Individual shares of a foreign corporation represented by an

B) Global Depository Receipts(GDR)

Answer : Global Depositary Receipts (GDRs) are negotiable certificates issued by depositary banks which represent ownership of a given number of a company’s shares which can be listed and traded independently from the underlying shares. These

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