StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Legal Aspects of International finance - Essay Example

Cite this document
Summary
International finance binds together domestic and global financial transactions in an efficient and competitive way. (Gianaris, 2001). International trade and finance, which promote specialization, productivity, and living standards for all countries, is one of the biggest industries today, and markets for the exchanges of currencies must exist to facilitate such international transactions…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.6% of users find it useful
Legal Aspects of International finance
Read Text Preview

Extract of sample "Legal Aspects of International finance"

Download file to see previous pages

Stock is the type of equity security with which most people are familiar. When investors (savers) buy stock, they become owners of a "share" of a company's assets and earnings. In other words, the companies borrowed directly by issuing securities to investors in the capital markets. By contrast, indirect finance involves a financial intermediary between the borrower and the saver. Emerging market bonds is a Security markets in countries such as Mexico and Malaysia that are still developing their industrial base.

Investments in emerging markets entail substantial risk with the potential for above-average returns. The direct or indirect benefits of international trade and finance come primarily from the enlargement of the market and the specialization and more efficient employment of productive resources, as well as technological advances. International transactions involve covenants agreed upon by different countries. The discussion of the paper is about the covenants involved. Debt covenants, also called banking covenants or financial covenants, are agreements between a company and its creditors that the company should operate within certain limits.

Debt covenants are agreed as a condition of borrowing. They may be changed if debt is restructured.(www.moneyterms.co.uk). One of the importances of debt covenants is that it can impose heavy obligation. Companies are careful in dealing with the covenant; breach of a debt covenant allows creditors to demand immediate repayment. A breach of covenants usually leads to a renegotiation of the terms of debt. In order to prevent companies from meeting the requirements by adjusting their accounting practices rather than by genuinely maintaining the required level of financial health, debt covenants not only specify the numbers that should be met, but also exactly how they should be calculated for the purposes of the debt covenant.

This means that if a company breaches, or is in danger of breaching its debt covenants, not only does this indicate that the company is not financially strong, but also that the problems are likely to become worse as lenders react. The following are reasons why covenants are important: (Noonan, 2005)1. Covenant protect bondholders against a diminution in value of their investment through:Credit deteriorationLoss of "equity cushion"Loss of control over assets Loss of seniority position 2. Covenants increase the chance of capital gains for bondholders because they force the company toDeleverage (or, more accurately, limit the company's ability to releverage)Reinvest earningsThe typical restricted payments covenant requires the company to retain 50% of net income in the business and allows 50% to be dividended out to to stockholders3.

As a result, covenants lead to credit improvement which increases chance that bonds will trade above parHigh Yield Debt Covenant Optional Redemption - Most issues of tax-exempt bonds have "call protection" wherein the bonds may not be called (i.e. redeemed) by the issuer for a specified period after the date of issue. A typical call protection period on a 30 year bond is the first 10 years after the issue date. After the initial period, many tax exempt bonds contain optional redemption provisions which permit the issuer to call the bonds prior

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Legal Aspects of International finance Essay Example | Topics and Well Written Essays - 1250 words”, n.d.)
Retrieved from https://studentshare.org/miscellaneous/1530189-legal-aspects-of-international-finance
(Legal Aspects of International Finance Essay Example | Topics and Well Written Essays - 1250 Words)
https://studentshare.org/miscellaneous/1530189-legal-aspects-of-international-finance.
“Legal Aspects of International Finance Essay Example | Topics and Well Written Essays - 1250 Words”, n.d. https://studentshare.org/miscellaneous/1530189-legal-aspects-of-international-finance.
  • Cited: 0 times

CHECK THESE SAMPLES OF Legal Aspects of International finance

Executive summary and table of contents

For example one partner who has a strong background in Finance can look after the financial aspects of the business and the other partner who has good marketing and HR skills can manage the Marketing and HR aspects of the business.... Partnership can also be very cost-effective as the partners can specialize in different aspects of the business.... Secondly when there are two or more partners involved the ability to raise the finance for the business increases....
3 Pages (750 words) Essay

The Caspian Oilfields Development Project

The Caspian Oilfields Development Project Name Institution Date Project description Assessment Task  The Caspian Sea region has the potential to export oil and natural gas to Europe, South Asia, and East Asian.... With rising gas and oil prices and growing worldwide demand for oil and natural gas, Caspian region countries including Russia, Azerbaijan, Kazakhstan, Turkmenistan, Uzbekistan, and Iran are developing several measures for improving exports of oil and natural gas....
6 Pages (1500 words) Essay

Mortgage loans in Italy and a residential financial analysis

2This document is important for: Signing the preliminary purchase agreement Requesting bank financing Opening bank accounts Concluding the final purchase agreement with notary Purchasing an automobile Arranging public utilities contracts Presenting declarations to public offices , whether communal, regional or state13 The time value of money is used as the base for all ideas in finance as it has a direct impact in business, consumer, and government finance as the time value of money derives for the concept of interest....
5 Pages (1250 words) Essay

International accounting and finance

Prior to determining the similarities between the aspects of financial management between a domestic and an international organization, it is important to determine the basic difference between these two organizational entities.... While a domestic corporation operated within a… l market within a country or a regional market, a company operating on the international arena, often referred to as a multinational corporation is one which is involved in the production or the delivering of services in more than a single country....
16 Pages (4000 words) Essay

Legal Aspects of Exploiting the Weaknesses of Terrorists

The obligation of America to combat terrorism is an obligation not only to her citizen but also to the international community as well (Carillo-Salcedo, 2009, p.... In general the measures are within the ambit of the laws of the United States or can be asserted to be consistent within the laws of the United States....
10 Pages (2500 words) Research Paper

The role of legal systems in corporate governance

Legal systems affect almost every aspect of the society; one of the societal aspects that is affected by these systems is corporate governance.... The objective of this discussion is to investigate and provide a report in relation to the roles and effects of legal systems on corporate… It shall also focus on the discussion of the relationship between legal systems and monitory unions.... The results of this study indicate that the creation of the structure of corporate governance is usually based on legal systems....
4 Pages (1000 words) Essay

What is Finance and what is the benefit of choosing Finance as major

My interest in finance was spurred by the fact that if felt having skills in the subject could make it possible for me to have a level of influence on economic affairs both from a personal and social point of view.... Financing systems and banks in the US are unequivocally critical… I was determined to be part of the group that is responsible for shaping economy and I could not think of anything more suitable than the field of finance.... In addition, I was ognizant of the fact that with a working or professional knowledge in finance, I could not only manage my personal finances effectively but i could also use the skills in any other field that I decided to enter later in life....
4 Pages (1000 words) Essay

Capital Structure Impacts on Financial Performance of Real Estate in Chinese Stock Exchange

In cases of concentrated ownership among a few shareholders, there exist preferences of use of retained funds as the source of finance to debtors and equity, in that order.... 2013.... Profitability And Sources Of General Manufacturers In 2009-2011, Annals Of The University Of Oradea, Economic Science Series, 22, 2, pp....
4 Pages (1000 words) Literature review
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us