International financial management Essay Example | Topics and Well Written Essays - 1500 words - 1

International financial management - Essay Example Zeus Plc can apply for the direct loan from the host government in order to finance its project. The host country i.e. Malaysia must arrange for the venture capital in order to reduce the financial risk associated with Zeus Plc. Country risk was described by Levi (1990) as the type of risk that, because of a consequence of war, social or political events, or revolution; a firm might not be rewarded or paid for their exports. It applies to credit granted within trade and also to the foreign investment (Kosmidou, Doumpos and Zopounidis, 2010). However, it is also a part of financial risk. Scholars describe financial risk as a common term that is used for multiple risks that are close associated with and involves financial transaction (Frenkel et al, 2004; Siddaiah, 2010). In this regards, notion of debt and equity also becomes prevalent. The relation between debt and equity reflects the debt used for financing a company and equity of shareholders. In terms of the country risk ranking, UK is at 19th place as compared to 11th position in 2008. The score declines which means that in general the country risk of UK is 10 points less than the standard score designed for the AAA sovereigns (See Appendix 1 (Euromoney, 2012). As of now, its country risk rating is A2 (Globaledge, 2014). Three types of ventures have been discussed i.e. joint venture, franchising, and subsidiary. Joint venture is the type of strategic alliance of two different companies where both of them decide to act jointly, normally forming a two different legal entity, for a similar purpose (Uta, 2001; Van and Wachowicz, 2008). Lima (2008) stated a subsidiary means a unit which is actually controlled by a different entity (Epstein and Jermakowicz, 2010). Zeus Plc is assumed to be a large global mining company in the United Kingdom, which is deeming to extract minerals from the deposits which it owns at Tapir River in Malaysia. Country risk is