Question

 How is international financial management different from domestic financial management?

Answer 1

International financial management differs from domestic financial management in many aspects. Let's discuss one by one :

Exposure to Foreign Currency: One of the main difference between international and domestic financial management is foreign currency exposure. Currency exposure puts impact on each and every transactions of international business.

Economic and Political Environment: An international business is affected by various political and economic environment. Before doing a business in a foreign market, one needs to check the trade policies whether it is feasible for the current business or not. Financial manager has to thoroughly analyze the policies to know whether it is suitable for their business or not.

Legal and Tax issues : Another important aspect where we can find difference is legal and tax aspect. International finance manager will analyze the taxation structure to know whether their home country business will rock in foreign country or not.

Capital Management: In an international business, one of the main role of the financial manager is to raise capital and there are enough ways to do so. This creates a challenge for the manager to choose the right source of capital so that there will be less expenses.

Imperfect Market : Imperfect markets, where there is difference in transportation cost, tax rates, also market information are not clear and not quickly disclosed, push a finance manager to find out the best opportunities across the countries.

Although the objectives of financial management are same for both domestic and international finance, i.e., wealth maximization of shareholders, still we find the above major differences.