International financial management, also called international finance, is a well-known term in today’s time. It means financial management in an international business environment. But it is different from financial management as it involves other factors like currency, political situations, imperfect markets, and diversified opportunity sets.
Major Facts
Below are the facts listed to understand the actual concept of International Financial Management in India.
Foreign Exchange
The foreign exchange comes with the additional risk that a finance manager is required to observe in an international setting. Foreign exchange risk is associated with risk related to changing market prices of currency that has the power to convert a profitable deal into a loss.
Political Risks
Political risks refer to any change in the business economic environment of the country. These changes include Taxation Rules, Contract Act, or any unforeseen government action. It refers to the government of a country that can change the rules of the game anytime, in an unexpected manner.
Market Imperfection
Because of market and product integration, the world economy faces a lot of differences across the countries in case of transportation cost, different taxation systems, etc. Imperfect markets pressure the finance manager to grab the best opportunities across international borders.
Enhanced Opportunity Set
Taking a business across national borders, in which a business expands its chances of reaping fruits of a different taste. it helps in growing the opportunity for other businesses but also changes the overall risk of business to various nations.
Objectives of International Financial Management:
Acquisition of Funds
This involves generating funds from internal and external sources. The focus of international financial management is to grab the funds at the lowest possible cost.
Investment Decisions
International financial management deals with the investment of acquired funds in an optimum manner and targets to maximize shareholders’ as well as stakeholders’ amount.
When IFM is compared to national financial markets, international markets have other analytics and dynamics. Proper management of international finances promotes the organization to achieve a good level of efficiency and effectiveness in every market. Hence, without international financial management, establishing a good positive market can be extremely difficult.
Organizations are encouraged to invest capital in international markets for the below reasons:
- Efficiently produce products in international markets
- Obtain the essential raw material needed for production
- Broaden and diversify markets
- Yields will be high
International financial management(IFM) has the same features as financial management other than the fact that financial decisions made are taken in the area of international business. The international financial activities help the organizations to connect with foreign dealings addon help with international business partners including customers, suppliers, lenders, etc.
An online financial management certification course can help many people incredibly to understand the concept of international financial management.
An online FM course is launched to help people acquire an understanding of advanced concepts and techniques which is required to solve the financial challenges of an organization.
Online financial management is a course structure in such a way that it provides information to the participants about the factors affecting the financial performance, modes of capital management, risk minimization strategies, and guiding principles on investment decisions. So, if anyone wants to perform well in the discipline, an online financial management course is highly recommended.
International trade and related financial activities offer both opportunities and associated risks for investors, exporters, and capitalists. Understanding the emerging trends in this field, people can learn how to invest in the best manner in today’s environment. The field of international finance has seen significant growth over the past time.
International finance is the important branch of financial economics that resolves with the monetary or the macroeconomic interrelations between two or more nation-states.
This field studies the relationships and dynamics that present in the global financial systems or the international monetary system such as the balance of payments, stock exchanges, exchange rates, foreign direct investment as well as international trade.
Multi-national organizations offer the job to the experts in international financial management to study the interplay between the many other elements of international finance and accordingly execute strategies for international business for their organization. This process is also known as multinational finance, international monetary economics, or international macroeconomics.
Scope of international finance management
Investment decisions:-
- Investments mean utilizing and allocating your funds in assets or other projects or the production whatever it may be, but it should be beneficial and should be used as an asset.
- Investment decisions taken by the investor are backed by his decision ability. A person has to decide where to invest and more important thing how much amount to be invested. These decisions must be taken by an inner voice and proper planning as it may decide the faith of the concern.
Financial decisions:-
- One of the important scopes of the financing manager involves making financial decisions.
- The finance manager is the person to decide where to raise funds. He can either raise funds from the company’s own Money like equity, Retained earnings or may lend from debentures, bank loans, bonds, etc.
- The main goal of the finance decision is to have an optimum capital structure and plan. The finance manager has to be more aware while deciding about finance uprising.
- More usage of equity may result in loss of ownership and an increase in debts will lead to more interest paid on borrowed funds.
Dividend decisions:-
- The finance manager is the only one who has to decide about the profits of the company, he is the one to choose between sharing the profits with the shareholders or retaining it for the company for future use.
- The dividend is a portion of profits that is to be paid to shareholders as per share purchased by them. The finance manager has to decide according to the position of the concern and shareholder’s interest as both of them are of high importance
Benefits of International finance management
The benefits of international finance are listed below:
- Availability to the capital markets across the world allows a country to borrow during tough times and lend during good times.
- It promotes domestic investment.
- Worldwide cash flows can promote correct efforts against bad government policies.
- It prevents excess domestic regulation in collaboration with global financial institutions.
- International finance moves towards healthy competition and, addon, a more effective banking system.
- It offers information on the various areas of investments and leads to effective capital allocation.
