Concept of International Financial Management, Its Types and Functions

Only available on StudyMode
  • Download(s) : 131
  • Published : May 12, 2013
Open Document
Text Preview
International financial management is a system of economic decisions in the conditions of internationalization of economic activity of firm. Thus the firm has to proceed from a postulate that its commercial activity in the foreign markets will make big profit, directly or indirectly, than in the domestic market. All decisions which are made in various divisions of firm have to be estimated from financial positions. Otherwise the success of division’s functioning is doubtful. The essence of the financial manager’s activity in the international corporation, as well as in the national organization, consists of searching the answers to three main questions: where to find financing sources for firm (bank), where to direct financial flows for maximizing profit and how to neutralize the risks. However the number of problems arising while trying to answer the questions is much wider in multinational corporation than during the work of the manager in the conditions of domestic market. Thus the variety of the means available for the international financial manager is much wider. Chapter 1. The international financial management of its function, types and role in development world economy and the international economic relations

1.1 Concept of the international financial management, its types and functions

The international financial management represents the system of the economic decisions concerning realization of financial management in the conditions of internationalization of economic activity of firm; in other words — it is system of financial management which is carried out in the conditions of activity of multinational corporations on the international markets. Objectives of financial management are:

* financial analysis and decision-making system;
* planning of short-term financial resources usage;
* planning of long-term financial resources usage;
* analysis of possible risk;
* control and reporting of implementation of the decision.

Besides tasks similar to financial management ones, the international financial management deals with absolutely specific problems which it solves depending on international relations. They include: • Assessment of state of the country in relation to its external positions, i.e. the analysis of a condition of its balance of payments. • Planning of financial operations from the point of using various currencies in international payments. • Financing export activity

• International budgeting of the capital, carrying out foreign direct investments and portfolio investments. • Operations in the euro currency, euro credit and euro bond market

Financial management connected with foreign economic activity of a firm controls condition of its assets in foreign currency and management of all types of currency risk. The main task of the financial manager consists of an assessment of short-term and long-term currency assets and firm obligations through a prism of time and space of the international markets. The majority of the decisions made concerning formation and use of short-term assets of firm is connected with an assessment of provision of foreign currencies and influences of their ratio on trade and credit operations of firm. There are several types of financial management:

• The aggressive management interfaced to high risks, for example, a problem of achievement of the objectives of the enterprise in the shortest terms with the maximum use of external sources of financing, first of all the loan. • Conservative management is based on minimization of risks. One of its main goals is ensuring the maximum financial stability as well as stability of development of production acts. • Moderate management - a reasonable compromise between aggressive and conservative. Many financial and economic indicators in moderate financial management come nearer to standard, planned, average market, socially normal or industry average. • Ideal management where, on one hand, are...
tracking img