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Financial Decisions in the Global Context

Financial Decisions in the Global Context. Finance Function: Accounting and Stewardshipl Financial Planning and Control Research and Analysis Risk Management Cost Centre to profit centre Accounting– Economics-- Mathematics. Finance Manger.

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Financial Decisions in the Global Context

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  1. Financial Decisions in the Global Context • Finance Function: Accounting and Stewardshipl Financial Planning and Control Research and Analysis Risk Management Cost Centre to profit centre Accounting– Economics-- Mathematics

  2. Finance Manger • Book Keeping and Accounting Data • Financial Reporting and Compliance • Cost analysis • Business Analysis and investment • Research and Mathematical Model Building • Treasury Management

  3. Financial Markets • Large and Globally Competitive • Integrated and Overlapping • Interdependent Economic Logic • Multilateral Regulatory Framework • Sophisticated Pricing Matrix

  4. Financial Decisions • Investment Decision Global Framework Changing Risk Profile Country and Currency risk over and above Business risk Financing Decision as Important as Investment Decision Adjusted Present Values

  5. Capital Structure and Financing • Balance sheet: Maturity Profile of Assets and Liabilities Foreign Currency Loans Debt Equity Ratio Fixed vs. Floating Rate Liabilities • Cash Flows: Currency Mix Project Risk (Beta) Committed Costs

  6. Working Capital Decisions • Management Of Current Assets: Cash Management (Centralised Depository) Inventory Carrying Costs (Credit Policy) Accounts Receivables and Transfer Pricing Intra- Company Deposits • Objective: To Maximise Returns on Short-Term Assets

  7. Managing Current Liabilities: Currency Fluctuations and short term Funding Intra- Company Loans Tax Environment Invoicing Decisions • Overall Goal is To Minimise Short-Term Financing Costs

  8. Why International Finance? • Domestic Resource Gap • Cost Of Capital in Domestic Vs. Globally Integrated Markets • Risk management and Hedging Options • Monetary Policy Imperatives

  9. How Does International Capital Market Work? • Providers of Funds: Countries with Current Account/Savings Surplus looking for International Investment Avenues to Maximise Returns • Seekers of Funds: Borrowers from Markets (Countries) with Savings Deficit and High Cost of Capital • International Portfolio Investors: To Diversify Risks and Maximise Returns

  10. Market Structure • Foreign Exchange Market: Spot and Forward Largest and Central to world Financial System Globally Integrated and Efficient • International Money Market (The Euro Currency Market) Short term Deposits and loans Dominated By Commercial Paper Issues

  11. Medium Term Debt Markets (The ECB market): Syndicated Loans Structured Financing • Long Term Bond Markets

  12. What Does it Mean for Corporates? • Assembly Line Financing (Independent of Balance Sheet. Currency Neutral, Maturity Transformation • Risk Management • What it means :Develop an Integrated Corporate Financial Model

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