International financial management of an organization is a complex process, involving its own methods and procedures. It is made even more complex because of the globalization that is making the world’s financial and commodity markets more and more integrated. This process of integration is both across countries as well as markets. Not only the markets but even the organizations are becoming international in their operations and approaches. This changing scenario makes it imperative for professionals pursuing advanced financial management courses to study the field of international finance. Let’s study the scope of international financial management and understand why it is essential to study it.

Scope of International Financial Management

The main objective of international financial management is to arrange sufficient funds for meeting the short-term and long-term goals of an organization. A financial manager has to concentrate on the following areas of international finance function:-

• Estimating Financial Requirements

The fundamental responsibility of the international finance manager is to estimate the short and long term financial requirements of the business. To determine this, the finance manager has to prepare a financial plan for the present as well as the future, based on the past financial data of the business. This includes estimating the amount required for purchasing fixed assets as well as the working capital.

• Deciding Capital Structure

The capital structure refers to the kind and proportion of different securities for raising the required funds. After deciding about the amount of funds required, its time to decide which type of securities should be raised. It may be wise to finance the fixed assets via long-term debts and current assets via short-term debts.

• Selecting a Source of Finance

After preparing the capital structure, the appropriate source of finance needs to be determined. Various sources from which finance can be raised can include share capital, debentures, financial institutions, commercial banks, public deposit or equity, etc. If finance is required for short-term then a bank, public deposits, and financial institutions are appropriate. On the other hand, if finance is required for long-term, share capital and debentures might be useful.

Trends in International Trade and Cross-border Financial Flows

Globalization essentially involves the various markets being integrated across geographical boundaries. Integration of financial markets involves the freedom and opportunity to raise funds from anywhere in the world and invest it anywhere through any type of investment. Though the degree of freedom differs from country to country, the end is towards having reduced control over the international markets. As a result of this freedom, anything affecting the international financial markets in one part of the world automatically and quickly affects the rest of the world.

Bottom Line

Companies operating in international markets are not the only ones that need to be aware of the complexities of international finance. Even the companies operating in domestic markets need to understand the issues involved. To understand the concept of international finance, you may need the guidance of an advanced financial management course. A financial management online certification is specially designed for those who wish to gain an understanding of advanced concepts and techniques of international finance.