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.
Nobody downloaded yet

International Finance Assessment - Case Study Example

Comments (0)
This case study is about the financial Crisis that occurred in the British aero engine manufacturer Rolls-Royce and several other relevant points about the efforts taken by the company to handle the situation and to avoid such crisis from happening in the future…
Download full paper

Extract of sample
International Finance Assessment

Download file to see previous pages... When a firm operates only in the domestic market, both for procuring inputs as well as selling its output, it needs to deal only in the domestic currency. As companies try to increase their international presence, either by undertaking international trade or by establishing operations in foreign countries, they start dealing with people and firms in various nations. Since different countries have different domestic currencies, the question arises as to which currency the trade should be settled in. The settlement currency may either be the domestic currency of one of the parties to the trade, or may be an internationally accepted currency. In this case, Rolls-Royce has agreed on a dollar as the currency for settlement. The mechanism by which the exchange rate between these currencies i.e. the value of one currency in terms of another currency is determined, along with the level and the variability of the exchange rates, can have profound effect on the sales, cost and profits of a firm. The change in the value of currencies takes place because of the change in the demand for holding that particular currency. The businesses may be affected in a number of ways because of the changing exchange rate. Some of them are as follows:
Exchange rates may be of different types like fixed exchange rate, floating exchange rate and also exchange rates with limited flexibility. Different kinds of exchange rate systems have different methods of correcting the disequilibrium between international payments and receipts. This actually is one of the basic functions of these mechanisms.
Fixed Exchange Rate System - As the name suggests, under a fixed or pegged exchange rate system the value of a currency in terms of another is fixed. These rates are determined by governments or the central banks of the respective countries. The fixed exchange rates result from countries pegging their currencies to either some common commodity or to some particular currency. There is generally some provision for correction of these fixed rates in case of a fundamental disequilibrium. The Gold Standard System and the Breton Woods System are some of the examples of Fixed Exchange Rate System. There are also particular variations of the fixed rate system like:
Currency Board System - Under this system, a country fixes the rate of its domestic currency in terms of a foreign currency, and its exchange rate in terms of other currencies depends on the exchange rates between the other currencies and the currency to which the domestic currency is pegged. The biggest advantage of a currency board system is that it offers stable exchange rates, which act as an incentive for international trade and investment. The discipline enforced on the government and the financial system also helps in improving the macroeconomic fundamentals in the long run.
Target Zone Arrangement - A target zone arrangement is system in which a group of countries sometimes get together, and agree to maintain the exchange rat ...Download file to see next pagesRead More
Comments (0)
Click to create a comment
International Finance and Financial Crisis
In an outstanding work on the ways of handling the crisis by an organisation, Dominic Barton and his co-authors (Roberto Newell and Gregory Wilson) prescribed five ways of handling financial crisis (Barton, et al., 2002, pp.90-108). Understand and maximise the current cash positions - In the theory it is prescribed that the outset the company should have a clear understanding of its present cash position.
18 Pages(4500 words)Case Study
International Finance
ICI is one of a small number of companies listed continuously on the leading UK stock index - originally the FT 30, currently FTSE 100 - since the 1930s (ICI Annual Report, 2006). Over the last few decades, ICI has been an acknowledged leader in diverse disciplines, including fundamental science, engineering, manufacturing and human resources.
10 Pages(2500 words)Case Study
International finance assessment
As such, the comparative advantage will also allow the firm to price the goods at a cost, which is lower than that offered by its competitors in the market. The assumptions of the theory can be refuted as weak
2 Pages(500 words)Essay
International Finance and Banking
te in which they will enjoy income from variations in currency exchange rates if they sell the products in Malaysia using the current spot rate in which the 67,500 units*450 per unit =30,375,000 MYR. The amount in three months is obtained by discounting the proceeds by a four
3 Pages(750 words)Case Study
International finance
First, the debt to equity ratio is a financial ratio that is used to measure the quantities of a business’s borrowed resources, in relation to the resources owned by the business (McClure, 2011:n.p). Thus, a
3 Pages(750 words)Case Study
International Finance
Based on the importance of local currencies for example in undertaking local transactions and paying taxes, it is vital for the governments experiencing weak
6 Pages(1500 words)Case Study
International Business Finance
Hence the partners in Germany create an operational and decentralized form of control (Varshney & Maheshwari, 2010; p. 881). Particular operational
6 Pages(1500 words)Case Study
International Finance Case
The proposed equipment is efficient in materials and labor costs, it would eliminate human variability that caused ampules spoilage and had a capacity of 6 million, 25% more than MSDI had anticipated in 1988. An unresolved issue is whether to use Pesetas for cash flow
5 Pages(1250 words)Case Study
InternationAL FINANCE
Financial service industry is no longer playing a critical role aimed at initiating corporate social responsibilities as expected. The primary essence of a corporate social responsibility is not all about socializing corporations. The
5 Pages(1250 words)Case Study
International business finance
The management is, therefore, required to form a team of experts that should take the responsibility of making such analysis and prepare a pertinent report to the
12 Pages(3000 words)Case Study
Let us find you another Case Study on topic International Finance Assessment for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us