Why Is It Important For Study International Financial Management?
As the three major functions of business, i.e., consumption, investment, and production are highly globalized; therefore, it is essential to fully understand all important aspects of international financial management. It is completely opposite to the situation that existed decades ago that most of the scholars or professors were ignoring the international dimensions of finance. Nowadays the financial market is highly globalized, as a result, it is vital to understand the international aspects of the finance.
Q2. How is international financial management different than domestic financial management?
Three major aspects set apart international finance form domestic:
a. Foreign exchange and political risk
The exchange rates of the currencies fluctuate continuously in an unpredictable manner around the world, especially those of major currencies such as US dollar, British pound and euro. Therefore, it effects all production, investment, and consumption. Political risk is the other major aspect which is the policy and regulation of a country about foreign investors such as change in tax, expropriation of assets and other regulation that may affect the foreign investors.
b. Market imperfection
Market imperfection is the barriers that still exist for MNCs around the world. Legal restrictions, excessive transaction and transportation costs, asymmetric information, and discriminatory taxation are the example of…