1. INTERNATIONAL FINANCE
INTRODUCTION
The emergence and rise of multinational companies has resulted in high levels of international business activities

2. INTRODUCTION
The emergence and rise of multinational companies has resulted in high levels of international business activities. International business encompasses commercial transactions like sales, investment and transportation between two or more companies.
These cross border flows has resulted in world economy Due to this there is a need to manage the international finance

3. MEANING & SCOPE
International finance is an area of financial economics
that deals with monetary interactions between two or more countries
concerning itself with the topics such as currency exchange rates, international monetary system, FDI including risk
it helps multinational corporations in dealing with cross border transactions by detailing various financial aspects involved to these transactions.

4.   
With increasing volumes and complexities of international business, the study of international finance has become a specialized subject dealing with study of-
Foreign exchange markets
Exchange rates
MNC financial systems
Risk management
International accounting systems

5. 1} foreign exchange markets
It is the market in which currencies are bought & sold against each other.
No single physical location.
A world wide network of primarily banks connected through a telecommunication network.

6. foreign exchange market
spot transactions
forward transactions
derivatives

7. 2}Exchange rates
Another aspect covered in international finance is that of exchange rate & its determination
In case a fixed exchange rate system is prevalent, their each member country sells a fix value for its currency inventories of gold or US dollar
In case of floating exchange rate, it is the demand & supply of the currency which determines exchange rate
Demand & supply of currency dependent on factors like interest rate, monetary & fiscal policy, BOP etc.

8. EXCHANGE RATE QUOTATIONN
Two ways in which currency is quoted:
EXCHANGE RATE QUOTATIONN
direct quote
variable unit- home currency
constant unit- foreign currency
indirect quote
variable unit- foreign currency
constant unit- home currency

9. 3} Multinational financial system
multinationals are the single most largest players responsible for international business & international finance.
MNC has numerous kinds of flows between the parent company , foreign business clients
MNC take decision on the nature of fund movement
Important variables in context of MNCs –
A} mode of transfer of funds-decision regarding funds like dividends, loans, interest payment etc.
B} planning for payment schedule C} managing the firm value

10. 4} Risk management
The earnings of firms engaged in international business are subject to fluctuations due to floating exchange rate.

11. 5} International accounting
International finance also studies the techniques of preparing consolidated financial statements of MNCs.
Like international audit, international taxations etc.

12. Need an importance of international finance

13. Diminishing national boundaries
Efficiently produce products in foreign markets 
Broaden markets and diversify
Earn higher returns

14. Rise in global companies
Single market
Competitive advantage
New Technologies

15. Rising world trade volumes

16. Increased cross border capital flow

17. FDI Flows by Region (in us $Million)
inflows
Outflows
2011
2012
2013
World
1700
1330
1451
1711
1346
1410
Developed
economies
880
516
565
1215
852
857
Developing economies
724
729
778
422
440
454

18. Changing nature of money and capital markets

20. Expanding technical infrastructure
Online transaction
New technology
Awareness about services offered in other
countries

21. Global consumers and global competition

22. Development of supporting financial infrastructure

23. Increased competition at global level

24. Domestic companies too feel the heat

25. Recent trends in international finance

26. De-regulation of financial markets
Financial deregulation can be referred to a variety of changes in the law which allow financial institution more freedom in how they compete.
So deregulation is very important as:
It helps in creation and expansion of world wide banking structure.
by increasing competition it increases ,it increases efficiency of business also.

27. But there were criticisms also for this excessive deregulation As according to the UN report a sustained process of deregulation within countries and between countries can lead to global crisis. Suggestions : Those financial instrument which do not contribute to long term economic growth should be removed, and speculative and risky activities should be encouraged.

28. Cross border M and A activity
Mergers
It refers to legal consolidation of two companies into one entity .
Acquisition
It occurs when one company takes over another and completely established itself as the new owner.

29. In 2007 when the economic conditions were good there was an increase of about 27% .
But in it slowed down because of financial crisis.
But till 2014 it has increased to double..

30. Rising popularity of Euro markets
It is a kind of market which is virtually free from regulations ,which provides excellent opportunities for investment ,funding and speculation.
Also provide risk management products.

31. Emergence of MNCs from emerging economies.
The last two decades have seen the emergence of a large number of multinational companies from emerging economies .
About 22 MNCs from top 100 infrastructure MNCs are headquartered in developing economies .
Example :TATA

32. Integration of markets globally
Through integration ,domestic investors can buy foreign asset and foreign investors can buy domestic asset .
So this gives the investors the freedom and opportunity to raise funds and to invest anywhere in the world, through any type of instrument.
Integration has lead to redistribution of financial resource from the surplus to deficit countries.

33. External Commercial Borrowing [ECB]
As the name suggest, ECB- when company borrows money from external [non- trading/foreign] sources.
Money is borrowed from non- resident lenders.
Via bank loans, fixed rate bonds, non- convertible shares, optionally convertible or partially convertible preference shares etc.
For a minimum average of 3 years.

34. From where can Indian company arrange for money ?
Within India
Outside India
Short term funds – money market
Long term funds – capital market
ADR , GDR, ECB , FCCB

35. Who can borrow ?
Hotel , infrastructure, IT , hospital sector. [but company must have registered itself under Companies Act 2013]
Micro finance institutions [MFI] can borrow via ECB.
NGOs, NBFCs, Companies can borrow via ECB, if they are involved in micro- finance activity.
SEZ units

36. AMERICAN DEPOSITORY RECEIPT [ADR]
From American’s point of view, it allows a foreign Co. [e.g. Indian] to raise money from American financial market.
Suppose, Indian Co. wants to raise money from America, by issuing shares in American Stock Exchange.
But then Indian Co. will have to maintain accounts according to American standards.
To prevent this problem, Indian Co. gives its shares to American bank.
American bank gives that Indian Co. receipts [called ADR] in return of these shares. Then Indian Co. can trade those ADR receipts in American share market, to raise money.
But then Indian Co. will have to pay dividends to those investors in dollar currency.

37. INDIAN DEPOSITORY RECEIPTS [IDR]
From India’s point of view, it allows a foreign company [e.g. America, British] to raise money from Indian financial market.

38. GLOBAL DEPOSITORY RECEIPTS [GDR]
GDR enable a company, the issuer, to access investors in capital markets outside of its home country.
It is listed & traded in the stock exchange.
If for example an Indian company which has issued ADRs in the American market wishes to further extend it to other developed and advanced countries such as Europe, then they can sell these ADRs to the public of Europe & the same would be named as GDR.

39. FOREIGN CURRENCY CONVERTIBLE BONDS [FCCBs]
FCCB means a convertible bond issued by an Indian Co. expressed in foreign currency & the principal & interest in respect of which is payable in foreign currency i.e. the payment of principal & interest is usually in the currency in which the money is raised. The option of converting bonds into equity at a price determined at the time the bond is issued.
It also has the benefits of a debt instrument as it includes guaranteed returns or yields which are payable in foreign currency.
FCCB have maturity period of about 5 years.
Currently, Indian companies can raise upto $50 million in a FY through issue of such bond via automatic route.