Theories of International Financial Managemen Assignment

Theories of International Financial Managemen - Assignment Example With intent to increase cross-border trade for international expansion, nations have liberalized their cross-border trade regulations. Hence the world is said to have facilitated with effective circulation of ideas, languages and cultural ideologies. Countries opened their doors to each other and thereby entrepreneurs looked for opportunities even outside their home lands. This liberalization process was further intensified by the rapid advancement in telecommunication and transportation technologies which offered increased flexibility to day to day business operations. Apart from this, as described in the article International Financial Management (August 29, 2010), a series of financial innovations such as cross border stock listings, international mutual funds, currency derivatives, and multi currency bonds have also contributed to the development of international financial management. The practices and scope for domestic financial management and international financial management are entirely different. Although, the meaning and objective of financial management will not change in an international setting, its dimensions and ranges vary dramatically. This report will critically evaluate theories of international financial management and the extent to which each stands up in the real world. Major elements of financial management The management of business finance is a complex process as it plays a crucial role in each and every area of a business. For the successful operation of financial management process, three key elements have been included. They are financial planning, financial control, and financial decision making. 1. Financial planning As in the case of every management process, planning is an inevitable factor in the organizational financial management. It is necessary to ensure that sufficient fund is available at the right time in order to meet the business needs (The 100 times). An organization generally plans short term and long term financial programs. Short term funds are required to pay salaries to employees and to invest in stocks and other securities. On the other hand, medium and long term funds increase the productive capacity of the business for making business acquisitions. 2. Financial control Financial department is highly vulnerable to fraud. Hence every financial manager would implement ranges of internal check systems in order to check falsification of accounts and thereby fraudulent transactions of money. In short, the financial control element ensures the safety of business assets so as to comply with business rules and thereby act in accordance with the best interest of the shareholders. Financial decision making The important financial management decisions relate to investment, business financing, and distribution of dividends. It is the duty of the financial management to discover the most appropriate resource of money in times of contingencies. A most major financial management decision is whether the business profits must be retained as reserves or distributed to shareholders as dividend. This element is the focal point of the financial management process as this tool determines the degree of efficacy of business financing process. Domestic and international financial management These two concepts aim at the same goal but function differently to achieve them. To