A lot of companies are looking to invest and seeking funding from foreign sources , as well as exporting services and goods to other countries. Companies’ involvement in overseas markets is on the rise and the trend is likely to remain. This is a result of various factors. The first is the shift in the global monetary system, from a relatively stable exchange system to a more flexible and volatile exchange system. There is also the rise of new markets and institutions specifically the Eurocurrency markets and a growing need for intermediation between financial institutions across the world.In 1971 in 1971, . This led to a drastic shift in the global money system. The old system of fixed exchange rates, in which devaluations and revaluations were only very seldom, gave way to the system of floating exchange rates.The most distinctive characteristics that distinguish international finance is the presence of multiple currencies, different taxation, and financial flow barriers. In all of these aspects, the numerous factors of currency and the issue of exchange rates have been given a lot of attention in the last few years. The exchange rate is the interaction between two currencies.The process of evaluating the foreign investment made within international financial markets comprises of identifying cash flows as well as the choice of a suitable discount rate, and the determination of the net present value. Foreign investments typically carry more risk due to factors like fluctuations in the value of currencies or discrimination in the treatment of an overseas company, and the threat of expropriation. The risk of changes in the exchange rate is always in the background for foreign investments. Furthermore, a foreign investment could be susceptible to discrimination and selective oversight in various ways, driven mostly by political motives. Additionally, the risk of expropriation with no compensation is possible, especially in nations where nationalist attitudes are strong. Due to the increased risk associated with investment from abroad If a company is considering investing in foreign markets would expect an increase in return.
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