International Financial Management in Unilever Plc

This report discusses the importance of international financial management in Unilever Plc, including key challenges, financial management theories, dividend distribution policy, and project appraisal methodologies. It also covers the role of international financial management in international trade and the methodologies adopted by Unilever to appraise projects.

INTERNATIONAL
FINANCIAL
MANAGEMENT

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
International Financial Management......................................................................................3
Importance of international financial management in Unilever Plc.......................................3
There are some key challenges which is applied on Unilever Plc in different international
market.....................................................................................................................................4
International Financial Management Theories.......................................................................5
Dividend Distribution policy in regarding to Unilever Plc....................................................6
Efficient Market Hypothesis Theory in regarding of Unilever plc........................................7
The methodologies adopted by Unilever of Appraising the projects.....................................7
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
International Finance means develop and utilise of funds for the purpose of creating
foreign economic activities. To take decision of financial management the following points
which is related to Investment, capital structure, dividend policy and working capital
management should be considered so that achieve the corporate objectives. It is directly related
to international trade. International financial management plays an important role in international
trade (Amagtome and et.al, 2020). In this report discuss about the importance of international
financial management in reference of “ Unilever” public limited company which is situated in
UK. Further in this report contains the details related to financial management theories and key
challenges.
TASK
International Financial Management
International financial management can be called international finance because it
supports the financing activities of the organisation. International financial management helps to
creating the standard for international tax planning. It arranges the funds through venture capital,
foreign exchange and leasing (Gkillas and et.al, 2019).
Importance of international financial management in Unilever Plc
Unilever Plc is a multinational consumer goods company situated in London, UK. It
includes beauty products, ice cream, food, condiments and personal care products. The company
is famous develop of soap in the world. The company is a dual listed of Unilever NV in
Rotterdam and London. It has more than 400 brands and each brand achieve 1 billion annual
sales. The objective of that company to reduce the carbon intensity by investing in technology.
The importance of international financial management are as follow-
1. It focuses on production of goods to achieving efficiency or effectiveness in a product.
2. To help develop of world trade.
3. It compares the inflation rates to investing in various debt securities.
4. It supports to calculating exchange rates of different nations.
5. It evaluates the foreign market to determine the economic activities of different countries

There are some key challenges which is applied on Unilever Plc in different international market
There are number of key challenges which is applicable on Unilever Plc . Corporation
should establish new technology so that fulfil the requirement of customer in changing
environment (Khan and et.al, 2019).
 Sustainability- The FMCG sector is directly affected sustainability factor. Unilever
company is the ability to maintain product in long term so that it can not change
technology in according to environment and not fulfil the customer requirement.
 Maintain margins and prices- FMCG company maintains prices and profits it does not
focuses on product quality. It should creates a minimum value for its customers because
they believe the best deal.
 Retail Execution- The FMCG company losses more than 20% due to products removed
from retail execution. The company should maintain the efficiency of retail execution and
increasing the production activity of sales.
 Internet of things- Consumers access the information through google search. Biggest
famous brands use innovative methods in efficiently manner while limiting brand
communication costs.
 Online shopping- Consumers purchases a mix of online and offline when shopping. The
consumers demand only favourite goods so it becomes difficult the FMCG industry. The
consumers does not accept the new product with new technology (Kostini and et.al,
2019).
International Financial Management Theories
There are several types of management theories which are important to determine the
global finance but in present case five theories are important to understand international
financial management they are as follow:
1. Purchasing power parity- It determines the prices at different countries. It works on one
principle which says the prices should be same at every location if there are no
transaction cost and not trade barriers.
2. Interest rate parity- It defines the interest rates between two countries. This theory
determines the interest rate are different between two countries but it is equal to
difference between the forward exchange rate and the spot exchange rate. It is used by
the foreign traders to find the opportunities. The main purpose is that the returns should

be shame from investing in different currencies rather than interest rates (Oldani, C.,
2018).
3. The fisher effect- This theory explained by the economist which describes the
relationship between inflation and interest rate both nominal and real. After deduct the
budgeted inflation rate, the real interest rate should be equal to nominal interest rate. The
lender decision depends on real interest rate
4. The international fisher effect- It defines the relationship between the exchange rate and
nominal interest rate. The exchange rate of different countries is equal to difference
between the nominal interest rate of their countries. This theory is based on the present
and future risk free investments (Rashid, 2020).
5. Expectations theory- The expectation theory is related to benefits received from the
financial assets of various maturities of future yields.
Dividend Distribution policy in regarding to Unilever Plc
It defines the structure of company. The undistributed profit is divided to shareholder is
known as dividend. This theory is not relevant because investors can purchase and sell the
securities in the market when they need the funds. It is the part of company strategy because
there are number of reasons to pay the dividend of its shareholders. The amount of dividend
depends on some factors such as timing, laws, rules and regulation and company strategy. There
are four types of divided policy which is followed by companies they are as follow-
1. Regular dividend policy- In this policy company pays the dividend in ever year. If the
company earns abnormal profit then those profit are not distributed in shareholder but if
company occurs losses any year, it also pays the dividend to its shareholders
2. Stable dividend policies- It is commonly used by company. Under this policy company
pays the dividend at regularly. In this policy investors are certain to receive at fixed
amount of dividend.
3. Irregular dividend policy- In this policy company has no duty to pay dividend to its
shareholders. The board of directors decide the amount of dividend. They take decision
with earned profit. The company may adopt this policy to increase the growth by using
retained earnings.
4. No dividend policy- The company does not pay the dividend to the shareholders whether
company earns high profit.

The Unilever Plc applies regular dividend policy. The company pays the fixed amount of
percentage dividend to its shareholder. If any year company does not earn sufficient profit then
also pay the dividend. To adopted the regular dividend policy company becomes a brand value.
Efficient Market Hypothesis Theory in regarding of Unilever plc
This theory says that share prices show all the information. The shares trade at fair
market value. This theory is also called as efficient market theory. If the stockholders purchase
riskier investment then hypothesis theory provides higher returns to its shareholders.
The shares of Unilever states the financial position of the company. The shareholders
have continuously beaten the market over long term, it is impossible in according to the
Efficiency market hypothesis theory (Tran, 2020).
The methodologies adopted by Unilever of Appraising the projects
Theses methodologies are used by organisation to access project success and viability. It
evaluates the funds and economic condition of a project. There are various methods of project
appraisal they are as follow:
1. Economic analysis- In this analysis determined the some factor such as expenses,
requirement of raw materials and profits. The FMCG use this analysis to evaluate how
much sales would be necessary to achieve target profit.
2. Financial analysis- It is the backbone factor of the FMCG industry. This analysis helps to
determine the requirements of fixed capital and working capital (Zhu and et.al, 2020).

CONCLUSION
In the above report the international financial management is important for business. It
creates the relationship between exchange price and interest rates. The Unilever is adopted
different type of policy and evaluate the prices should be same at every location. The regular
dividend applies on Unilever Plc. Further in this report discuss the appraising project which is
beneficial for the company.

REFERENCES
Books and Journals
Amagtome and et.al, 2020. Integration of Financial Reporting System and Financial
Sustainability of Nonprofit Organizations: Evidence from Iraq. International Journal of
Business & Management Science, 10(1).
Gkillas and et.al, 2019. Integration and risk contagion in financial crises: Evidence from
international stock markets. Journal of Business Research. 104. pp.350-365.
Khan and et.al, 2019. Tourism logistics management through financial and regulatory measures:
evidence from a panel of countries. Asia Pacific Journal of Tourism Research. 24(5).
pp.443-458.
Kostini and et.al, 2019. Financial strategy of small and medium businesses on the creative
industry in Bandung, Indonesia. International Journal of Economic Policy in Emerging
Economies. 12(2). pp.130-139.
Oldani, C., 2018. Global financial regulatory reforms and sovereign’s exemption. Journal of
Financial Regulation and Compliance.
Rashid, M.M., 2020. Financial reporting quality and share price movement-evidence from listed
companies in Bangladesh. Journal of Financial Reporting and Accounting. 18(3). pp.425-
458.
Tran, Q.T., 2020. Corruption and corporate cash holdings: international evidence. Journal of
Multinational Financial Management. 54. p.100611.
Zhu and et.al, 2020. Green financial behavior and green development strategy of Chinese power
companies in the context of carbon tax. Journal of Cleaner Production. 245. p.118908.