BMI501 - International Trade Finance

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Last revision date May 25, 2020 1:48:39 AM
Last review date Aug 3, 2020 12:15:13 AM

Subject Title
International Trade Finance

Subject Description
The purpose of this course is to enable students to develop an understanding of the financial forces impacting the operation of multi-national companies.  Students will develop analytical abilities which will enable them to assess the financial impacts that multinational companies face in different situations and will enable them to find optimal solutions.  Students will be able to apply financial concepts to organizations operating internationally.  As well, students will develop an appreciation for the techniques used to control financial risk in international situations.

Credit Status
One credit.

Learning Outcomes
Upon successful completion of this subject the student will be able to:

  1. Identify the common objective of all businesses and explain how the agency factor affects international business success; list the three constraints that interfere with business objectives.  Describe the three theories that motivate businesses to expand internationally and name the four basic risks of international trade.
  2. Define the balance of payments and differentiate between the current and capital accounts.  Describe the four factors that impact upon the current account and the capital account.  Name the main five agencies that facilitate international trade and financial transactions.
  3. Contrast the functions of the five international financial markets.
  4. Research and interpret foreign exchange rate quotations.  Describe the spot market and calculate the bid/ask spread.  State the conditions under which a forward contract would be used and calculate the premium or discount.  Explain the reasons for these occurrences.  Explain the risks attached to forward contracts and illustrate with examples.  Interpret cross exchange rates.  Describe currency options, calls, and puts.
  5. Define exchange rate equilibrium and describe how supply and demand conditions affect it.  Evaluate the influence that relative inflation rates, relative interest rates, relative income levels, government controls, and expectations have on changing the supply and demand schedules.  Discuss the tactics used when speculating on exchange rate movements.
  6. Contrast the operation of the four exchange rate systems.  Describe how governments intervene in the four systems and what effect each has on business decision making.  Cite the methods used by governments to directly and indirectly intervene in the foreign exchange markets.  Describe the effect of government deficits on exchange rates and contrast the effects of a strong and weak currency on a nation's economy.
  7. Relate the theory of Purchasing Power Parity and the International Fisher Effect to changes in the exchange rates and illustrate the theories using examples.  Name the reasons why each theory may not always function as expected.
  8. Differentiate among transaction, economic, and translation exposure risks.  Explain the effects these exposures have on the cash flow and reported earnings of a business involved in international trade.  Discuss the relevancy of measuring these exposure risks.
  9. State how net transaction exposure is determined.  Evaluate the conditions under which hedging is or is not worthwhile.  Describe and compare the hedging techniques of future contract, forward contract, money market, and currency option.  Analyse the techniques of leading and lagging, cross hedging, and currency diversification. 
  10. Discuss the importance of cash flow management.  Differentiate the functions of cash flow management  from the perspective of a subsidiary versus the central office.  Explain the techniques to optimise cash flows while assessing the complications involved.  Appraise the effects of corporate policy on subsidiary performance and consider the possible options to alleviate potential managerial difficulties.
  11. Analyse country political and financial risk factors and describe the techniques to objectively assess country risk.  Explain the possible measures to reduce host-government takeovers.
  12. Discuss the effect of country corporate and withholding taxes, special provisions, treaties, and credits on earnings and cash flows.  Evaluate the use of transfer pricing policies.  Consider the strategies that might be employed to lessen the effects of country taxes on earnings and after-tax cash flow.

Essential Employability Skills
Communicate clearly, concisely and correctly in the written, spoken and visual form that fulfils the purpose and meets the needs of the audience.

Execute mathematical operations accurately.

Apply a systematic approach to solve problems.

Use a variety of thinking skills to anticipate and solve problems.

Analyze, evaluate, and apply relevant information from a variety of sources.

Show respect for diverse opinions, values, belief systems, and contributions of others.

Interact with others in groups or teams in ways that contribute to effective working relationships and the achievement of goals.

Manage the use of time and other resources to complete projects.

Take responsibility for one's own actions, decisions, and consequences.

Academic Integrity
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Please visit the Academic Integrity website to understand and learn more about how to prepare and submit work so that it supports academic integrity, and to avoid academic misconduct.

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Accommodation for Students with Disabilities
The College will provide reasonable accommodation to students with disabilities in order to promote academic success. If you require accommodation, contact the Counselling and Accessibility Services Office at ext. 22900 to initiate the process for documenting, assessing and implementing your individual accommodation needs.