MS-45 International Financial Management Test Paper
MBA - Master of Business Administration
Note: Answer any five questions.
1. Identify the factors which are to be taken into consideration by the countries, which seek to make use of foreign capital on their terms.
b) "The International economy is fast turning into a borderless global economy" Critically analyze in relation to International Financial system.
2. Prepare a Balance of Payments (BOP) statement with the following data. Show clearly, sub-balances such as trade balance, current account balance and capital account balance, etc., in the statement.
a) UFL Ltd. of USA invests in India, Rs. 3000000 to modernize its Indian subidiary.
b) A tourist from south Africa buys souvenirs worth Rs. 30000 to carry with him. He also paid hotel and travel bills of Rs. 50000 to a travel agency.
c) UFL Ltd. remitted Rs. 50000 as dividends to its parent company in USA.
d) The Indian sunsidiary of UFL Ltd., sold a part of production in other Asian countries for Rs. 1000000. UFL also borrowed Rs. 2000000 (to be paid in 6 months) from the British money market for meeting its immediate liquidity needs.
e) An Indian company buys medicine for Rs. 1000000 from Germany. 60% of the payment is made immediately and the balance to be made after 3 years.
f) An Indian subsidiary of a French company borrowed Rs. 500000 from the indian public to invest for the modernisation.
3. a) What do you mean by 'Foreign Exchange Market'? Discuss the role played by the main participants in this market.
b) Explain briefly and illustrate with an example, the chain method of making out cross rates.
4. Explain the need for foreign exchange exposure management. Discuss the various external exposure management techniques that are used to manage the exchange rate.
5. a) Define 'Letter of credit'. Explain the various forms of letter of credit. Which one is more popular and why?
b) Explain briefly the different types of policies offered by the Export credit guarantee corporation to provide cover for shipments made on a short-term credit.
6 a) "In the absence of a common currency throughout the world, a series of problems arise in International cash management." What are these problems? How can these problems be overcome?
b) Explain the need for an the advantages of centralised cah management for a company which is involved in international business.
7. An export company wants to raise capital from international markets. What are the basic considerations the firm should take into account while making this international financing decision? Explain.
