Financial Management

Consignment in International Trade Consignment in international trade is described as a variation of open account. In this arrangement, payment is sent to the exporter only after the goods have been sold by the foreign distributor to the end customer. The transaction is based on a contractual arrangement. Under a consignment arrangement, the exporter ships the products to the importer while still retaining actual title to the merchandise. The foreign distributor receives, manages, and sells Read more

A Letter of Credit (L/C) is identified in the sources as a method of payment used in international trade. It is described as a written obligation and a formal document issued by a bank on behalf of a customer. The fundamental purpose of an L/C is to ensure that the importer makes payment to the exporter once proof of shipment is received. The sources highlight that banks involved in an L/C arrangement act as a Read more

An Open Account is identified as a method of payment used in international trade. It is categorized as a form of trade credit. Trade credit, in general, arises when a firm purchases goods from another firm and is not required to pay for them immediately. During the period before payment becomes due, the buyer has a debt outstanding to the supplier. The sources indicate that trade credit can manifest in the form of an open Read more

International trade transactions between an exporter (seller) and an importer (buyer) are complicated by concerns that one party might not fulfil its obligation to the other. The exporter is typically concerned about receiving payment from the importer. There’s also a risk that the importer’s government could impose exchange controls preventing payment. Conversely, the importer may not trust the exporter to ship the ordered products. Financial managers must be aware of the methods available to ensure Read more

Foreign exchange risk management is a critical component of any business involved in international transactions. It encompasses the identification, assessment, and mitigation of risks that arise from fluctuations in foreign currency exchange rates. Due to the increased globalization of business and financial markets, coupled with the growth of international trade and volatility in exchange rates, understanding and managing these risks have become imperative for financial managers. Globalization has brought benefits like better international capital allocation Read more

The Foreign Exchange Market (Forex, FX, or currency market) is a market in which currencies are bought and sold. It is distinct from a financial market where currencies are borrowed and lent. The primary purpose of the foreign exchange market is to permit transfers of purchasing power denominated in one currency to another, enabling the trading of one currency for another. This is essential for international trade and investment, allowing, for instance, a U.S. business Read more

Introduction to International Financial Management International Financial Management is defined as the management of finance in an international business environment. It is essential to study IFM because we are currently living in a highly globalized and integrated world economy. This trend towards globalization and integration is expected to continue due to the ongoing liberalization of international trade and investment, as well as rapid advancements in telecommunications and transportation technologies. Financial managers must fully understand the Read more