International Finance and Law

Running head: INTERNATIONAL FINANCE AND LAW
International Finance and Law
Name of the Student:
Name of the University:
Author’s Note:

1INTERNATIONAL FINANCE AND LAW
Table of Contents
Foreign Trade Transactions involved in the case study:............................................................2
SWOT analysis of the company:................................................................................................4
References and bibliography:.....................................................................................................5

2INTERNATIONAL FINANCE AND LAW
Foreign Trade Transactions involved in the case study:
In the given case study, the Latest Fashion Company is planning to increase their
volume of business. They are expecting a 40 percent increase in their sales for the current
year. Increase in volume of sales requires additional working capital to meet the increased
manufacturing and operating expenses. They are also planning to import a machine from
Germany which requires additional fixed capital. As can be observed from the case study,
they are having two alternative options to raise capital for their short term and long term
capital needs. They can approach a bank and seek the short term funding against letter of
credit and other trade documents or they can go to the Factoring agent and enter into a
factoring agreement to raise capital either. For meeting their long term capital needs for the
machinery purchase, they can borrow the fund from the bank or they can enter into a
forfeiting agreement with the factoring agent.
Therefore, the whole process involves various basic foreign trade transactions, such as
Import of machinery, Export of goods and the borrowing of fund or arranging fund for
facilitating such import and export. They also can avail the benefit of currency swap to
reduce their net interest burden. The whole process involves a lot of paper work for various
approval and clearances.
All the above mentioned international transactions are subject to exchange rate
fluctuation risks. To mitigate such exchange rate fluctuation risks, the company needs to form
certain hedging strategies using some financial market instruments. Funds borrowed in terms
of foreign currencies either through bank loan or factoring or any other means, needs to be
repaid at a future date. If at that time the exchange rate gets increased, then the company may
suffer a loss, or if the exchange rate decreases in future the company may realize fewer
amounts in terms of home currency from their customers. To avoid such risks the company