1. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS LESSON7-1 GOALS  Explain the role of money and currency systems in international business.  Identify factors that affect the value of currency. MONEY SYSTEMS AROUND THE WORLD

2. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 2 Money and Currency Systems What is money? Acceptability Scarcity Durability Divisibility Portability Why is money used? Medium of exchange Measure of value Store of value

3. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS Foreign Exchange Defined: The process on converting the currency of one country into the currency of another country Exchange Rate: The amount of currency of one country that can be traded for one unit of currency of another country 3

4. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 4 Factors Affecting Foreign Exchange Balance of payments Economic conditions Money supply and demand Risk Inflation Political Stability

5. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS LESSON7-2 GOALS  Discuss foreign exchange activities.  Describe the main activities of the World Bank and the International Monetary Fund. FOREIGN EXCHANGE AND CURRENCY CONTROLS

6. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 6 Foreign Exchange Activities Changing exchange rates Affect currencies through supply/demand Floating exchange rates The foreign exchange market Network of banks and other financial institutions that buy and sell currencies Foreign exchange controls Government restrictions to regulate the amount and value of a nation’s currency

7. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 7 Japanese Yen Per U.S. Dollar

8. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 8 International Financial Agencies The World Bank Provide economic assistance to less developed nations The International Monetary Fund (IMF) Analyze economic situations Suggest economic policies Provide loans

9. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS LESSON7-3 GOALS  Discuss payment methods and financial sources for international business transactions.  Explain other payment methods and financial documents used in international trade. CURRENCY TRANSACTIONS BETWEEN NATIONS

10. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 10 International Financial Transactions Foreign trade payment methods Cash in advance Letter of credit Sale on account Sources of international financing Short-term financing Long-term financing

11. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 11 Other Payment Methods and Financial Documents Promissory note Bill of exchange Electronic funds transfer (EFT) Commercial invoice Insurance certificate