International finance Essay Example | Topics and Well Written Essays - 2500 words - 1

International finance - Essay Example Business entities are incorporated to cater need of some segment. The ultimate goal of any company is earning profits so that in can be further utilized to widen up the scope of that business operations. Any living being is in need to have oxygen for the survival. In the same way, any business entity must be provided with cash for its existence. The major sources of finance for any firm are equity and debt. Debt finance is raised from various financial institutions, with the commitment to repay it back after a horizon with some specific interest rate. To go for equity finance, the company has to enlist its shares in some registered stock exchanges. Fund is raised automatically when people starts buying those shares from the exchange. In exchange of the shares, the shareholders expect returns or benefits from the company under consideration. This is termed as shareholders wealth. In perfect market condition, the performance of any company and so as the shareholders wealth is not effected by any external market forces. As for example, the smaller companies do not change the market forces significantly, so they are into an almost perfect market situation. Shareholder’s wealth is of great importance for imperfect market where market forces are largely determined by competition. Any changes in the form of customer perception, economic condition, performance of the company under consideration, competitors move are largely reflected into the share prices. Company due course of its operation generates revenue. One way of creating value for the shareholders is directly transfer the revenue amount to the shareholders in the form of dividends without thinking about the contribution of others in the profit. This is an irrelevant technique for value generation. If this policy is employed the company will lose trust from all of its stakeholders other than shareholders. Companies announce its performance