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smu mba solved assignments of MF0015 Q1. Explain the goals of international financial management. Give complete explanation on Gold Standard 1876-1913. List down the advantages and disadvantages of Gold Standard.

Answer:Goals of international financial management: Maximize Profits: A company's most important goal is to make money and keep it. Profit-margin ratios are one way to measure how much money a company squeezes from its total revenue or total sales.

Minimize Costs: Companies use cost controls to manage and/or reduce their business expenses. To be profitable, companies must not only earn revenues, but also control costs.

Maximize Market Share: Market share is calculated by taking a company's sales over a given
period and dividing it by the total sales of its industry over the same period.


Management and Stockholder Wealth: Under certain circumstances, management may be more interested in maintaining its own tenure and protecting “private spheres of influence” than in maximizing stockholder wealth.


Social Responsibility and Ethical Behavior: By adopting policies that maximize values in the market, the firm can attract capital, provide employment, and offer benefits to its community.

Gold Standard 1876-1913: A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. As of 2013 no country used a gold standard as the basis of its monetary system, although some hold substantial gold reserves.

  1. Long-term price stability has been described as the great virtue of the gold standard. The gold standard makes it difficult for governments to inflate prices through expanding the money supply.
  2. The gold standard provides fixed international exchange rates between participating countries and thus reduces uncertainty in international trade.
  3. A gold standard does not allow some types of financial repression.

  1. The unequal distribution of gold deposits makes the gold standard more advantageous for those countries that produce gold.
  2. The gold standard acts as a limit on economic growth. Because a gold standard requires that money be backed in the metal, then the scarcity of the metal constrains the ability of the economy to produce more capital and grow."
  3. The gold standard is often blamed for prolonging the Great Depression, as under the gold standard, central banks could not expand credit at a fast enough rate to offset deflationary forces.
  4. Although the gold standard brings long-run price stability, it is historically associated with high short-run price volatility. 
Deflation punishes debtors. Real debt burdens therefore rise, causing borrowers to cut spending to service their debts or to default.


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