© 2011 South-Western | Cengage Learning

Foreign Exchange and International Finance

7-17-1 Money Systems Around the World7-27-2 Foreign Exchange And Currency

Controls 7-37-3 Currency Transactions Between

Nations

CHAPTER 7

INTERNATIONAL BUSINESS, 4e CHAPTER

SLIDE 2© 2011 South-Western | Cengage Learning

7LESSON 7-1

Money Systems Around the World

GOALSGOALSExplain the role of money and

currency systems in international business.

Identify factors that affect the value of currency.

INTERNATIONAL BUSINESS, 4e CHAPTER

SLIDE 3© 2011 South-Western | Cengage Learning

7

Money and Currency Systems

What is money?AcceptabilityScarcityDurabilityDivisibilityPortability

Why is money used?Medium of exchangeMeasure of valueStore of value

INTERNATIONAL BUSINESS, 4e CHAPTER

SLIDE 4© 2011 South-Western | Cengage Learning

7

Foreign Exchange

Balance of paymentsEconomic conditions

Money supply and demandRiskInflation

Political Stability

INTERNATIONAL BUSINESS, 4e CHAPTER

SLIDE 5© 2011 South-Western | Cengage Learning

7LESSON 7-2

Foreign Exchange and Currency Controls

GOALSGOALSDiscuss foreign exchange activities.Describe the main activities of the

World Bank and the International Monetary Fund.

INTERNATIONAL BUSINESS, 4e CHAPTER

SLIDE 6© 2011 South-Western | Cengage Learning

7

Foreign Exchange Activities

Changing exchange ratesThe foreign exchange marketForeign exchange controls

INTERNATIONAL BUSINESS, 4e CHAPTER

SLIDE 7© 2011 South-Western | Cengage Learning

7

Japanese Yen Per U.S. Dollar

INTERNATIONAL BUSINESS, 4e CHAPTER

SLIDE 8© 2011 South-Western | Cengage Learning

7

International Financial Agencies

The World BankInternational Monetary Fund (IMF)

Analyze economic situationsSuggest economic policiesProvide loans

INTERNATIONAL BUSINESS, 4e CHAPTER

SLIDE 9© 2011 South-Western | Cengage Learning

7LESSON 7-3

Currency Transactions Between Nations

GOALSGOALSDiscuss payment methods and

financial sources for international business transactions.

Explain other payment methods and financial documents used in international trade.

INTERNATIONAL BUSINESS, 4e CHAPTER

SLIDE 10© 2011 South-Western | Cengage Learning

7

International Financial Transactions

Foreign trade payment methodsCash in advanceLetter of creditSale on account

Sources of international financingShort-term financingLong-term financing

INTERNATIONAL BUSINESS, 4e CHAPTER

SLIDE 11© 2011 South-Western | Cengage Learning

7Other Payment Methods and Financial Documents

Promissory noteBill of exchangeElectronic funds transfer (EFT)Commercial invoiceInsurance certificate

INTERNATIONAL BUSINESS, 4e CHAPTER

SLIDE 12© 2011 South-Western | Cengage Learning

7

A Commercial Invoice