International BusinessIntroductionCathay Pacific Airlines Limited is the first international airline company whose headquarter is located in Hong Kong. It is founded by Australian Sydney de Kantzow and American Roy Farrell. Its main business is operating scheduled air services, air catering and aircraft engineering. Cathay Pacific Airlines use the Hong Kong International Airport as the hub.[1] The Swire Group has most stocks of Cathay Pacific, but as Chinese government started to get involved in Hong Kong airline market by setting up a rival airline, the Swire Group sell a plenty of Cathay Pacific shares to China International Trust and Investment Corporation and CNAC. The international market and the world trade bring both opportunities and threats to Cathay Pacific Airlines. Its spread and development either run fast in the new economical situation or be restricted in the Asian financial crisis. In this essay, I will discuss the situation that if I was the Financial Manager for Cathay Pacific, how would I deal with the different currencies in the trade in different countries, deal with the financial problem in during the development of the company and the strategy in the financial work, mainly by using the government and company bonds, other interest securities and bank balance.A qualified airlines company who can develop well in the increasing competition international market situation should attract numerous customers from all over the world. But how can people trade with the company smoothly by holding different currencies is a vital problem. The key point to resolve this problem is a data centre in the database system of the trade centre. This database is connected with the internet and it can renovate the exchange rate data of the certain day in the global currency market immediately. The second vital factor of the international trade is setting a certain kind of currency as a standard currency. All different currencies from all over the world should be conversed automatically to the chosen standard currency with the newest exchange rate which stored in the database above. By this way, all different currencies paid by customers from different areas are available in the trade of the airline service.It can give a concrete example that, if Cathay Pacific Airlines make AU dollar as the standard currency. All other money paid by customers from different locations can transformed automatically to AU dollar in the trade database centre by using the intraday exchange rate of the currency market. Customers from all over the world can buy the tickets all get other services from Cathay Pacific Airlines with their own money smoothly by this method.An important aspect of why airline transportation is different from other modes oftransportation is high-quality air transport services. But the high quality of the service should not be confined to the air, it also should be extended from air to the ground. So that passengers can ravel the whole process to enjoy to the quality of service. This service belongs to the category of the ground service. Ground service was originally a broad concept in the aviation system, it is also contrary to the "Air Service". Broadly speaking, the ground services should include airports, airlines and their agents enterprise services provided to airline passengers, various services provided by shippers, as well as air traffic controlling, Aviation Oil Corp and aircraft maintenance enterprises.There is a pivotal problem about the ground service that every airline would face. How to deal with the require payment for ground services in different currencies from different areas all over the world? The widely use of credit card is the most vital resolution of this problem. As everyone knows, the credit card issued by visa is available in almost all the currencies. Our Cathay Pacific Airlines can set POS in every airport. All the people who require ground service and need to pay a different currency can use the POS in the airport, and the money can conversed automatically through visa and the bank. Therefore, people from every location can get the ground service at the airport. In addition, the Cathay Pacific Airlines can set a site to exchange different currencies which are commonly used. Customers can get cash to pay the service they get.Raising capital or Financing is the fund-raising behavior and process of an enterprise. Companies often raise funds from the company's investors and creditors through certain sources, organize the availability of funds according to their situation of own production, operation and funds. In order to ensure normal production, operation and management activities needed in the development of the companies. The motivation of companies to finance should aside by the rules, through fixed channels and fixed way to follow. Channels of corporate finance can be recognized two main types: debt financing and equity financing. The debt financing refers to bank loans, issue bonds, the notes payable and the accounts payable, the second type mainly includes the equity financing. If I was the financial manager of Cathay Pacific Airlines, I would mainly choose the following ways to raise capital to finance new aircraft.Bank loansThe Bank is one of the most important financing channels of the enterprise. According to capital nature, the bank loans can be divided into working capital loans, fixed assets loans a nd special loans. Special loans’ lending rates tend to be more favorable, the loan is divided into credit, secured loans and discounted bills. Cathay Pacific Airlines can connect with different banks to estimate the operation of the company and lend money from them.[3]Equity financingThe stock has the character of permanent, no maturity, no restitution, no debt servicepressure, and thus a smaller financing risk. At the same time, the stock market provides a broad stage for the asset restructuring to optimize the organizational structure and to improve the enterprise's ability to integrate. Cathay Pacific Airlines can issue new shares to the creditors and investors to raise capital and use it in the new developing.Bond financingCorporate bonds, also known as corporate bonds, enterprises issued them in accordance with legal procedures, agreed to the securities to repay principal and interest within a certain period, that is a debtor-creditor relationship between the bond issuance enterprises and investors. Bondholders do not participate in the operation and management of the enterprise, but are entitled to a schedule agreed upon recovery of principal and interest. In bankruptcy liquidation, creditors take precedence over shareholders to have a claim on the remaining property of the enterprise. Corporate bonds and stocks both belong to the securities, and are freely transferable. The airline company can issue bonds to finance new aircraft.Finance leasesFinance lease is the dual functions through a combination of financing and financial objects, has both financial and trading functions. It plays a vital role in facilitating and promoting the company's technological progress. Finance lease is divided into direct lease, sale and leaseback and leveraged leasing. In addition, there are a variety of leasing types, such as combination of leasing and compensation trade, combination of leasing and processing and that of assembly and leasing Finance leasing business open up a new financing channels for the technological upgrading of enterprises, it improve the speed of production equipment and technology, company can also save money and improve the capital utilization. The Cathay Pacific Airlines can use the financial leasing to raise money and make the operating process more economical.Currency fluctuations compared to the changes taking place in the relative value of currencies issued by a country, different currencies. Currency fluctuations are the process is the daily exchange of the relative velocity between the various currencies on the basis of an ongoing impact. Currency fluctuations, currency exchange transactions, investors look forward to close cooperation in order to profit from their investment.[5]It is important to pay attention to exchange rate fluctuations may occur up and down movement. Investors to buy currency for purchase currency display upward movement compared to the opportunity to realize significant return on trading. At the same time, if the exchange rate is still a little flat, if the increasing in the relative value of the monetary base, on behalf of investors recognizing that there are no returns or lose money in the actual transaction.There are many factors that may lead to exchange rate fluctuations. One of the keyfactors is the current state of the economy and a country. If the prevailing view is that a country through a phase of serious conditions there will be a longer period, the country's currency, other countries compared, and may lose value.Political issues may also impact the nature of the exchange rate changes, a new government, a lack of confidence, may temporarily reduce the value of the currency of the country, on the open market. There are several options to avoid the crisis of currency fluctuate. And I will list the important ones.(1) Using the same currency in the trade of each company as long as possible. It gives an example, if your customers pay in U.S. dollars, you should ask your suppliers overseas U.S. dollar quotes and invoices.(2) Another option is to agree that this is a contract, lock in a fixed exchange rate, balance of payments on forward contracts. This ratio is usually market-determined exchange rate. This is to protect the interests of both sides.(3) What is more important in order to protect the company, I tell my customers in my proposal, which is the number of days for the X. After the expiration of the interest rate, the company has the right to re-pricing projects based on the current currency exchange rates.(4) If company have the contractual terms of the overseas companies, read the fine print carefully, and often the terms, pointing out that their client is responsible for currency fluctuations.(5) If the company have no choice but to work in multiple currencies, if the state of currency fluctuations in the currency conversion rate of your suggestions and recommendations, more than X%, than you have the right to re-pricing based on current exchange rate.(6) Pay special attention to the inflation rate can be high in emerging markets, and significant changes in currency valuations.(7) Ensure that the company is using a good system and experience wiring money to a global bank. Some local banks have less experience, which may lead to significant delays and large fees for each line.(8) We do not propose to increase the price of the trademark to protect themselves from currency fluctuations. Very price competitive environment, this approach can make you or your customers' competitiveness.In my opinion, when choose the type of financial strategy, the company needs to pay attention to the following aspects.A corporate financial strategy should adapt to the economic operation cycle. Under the conditions of market economy, economic development and running have a certain degree of volatility. This volatility is largely through the stages of the economic cycle recovery, prosperity, recession and depression. It has significant influence on financial strategy After several investment expansion in China, production rising to control inflation and tightening monetary policy to inflation in the development process bring great changes to the financial environment. Corporate financing, investment and assets from operating activities are subject to such fluctuations impact. In the development and selection and implementation of the corporate financial strategy, we must follow the process and the stage of the economic cycle, and to do as much as possible compatible with the economic operation cycle. When the economy is in recovery phase, the enterprise should be taken to increase plant and equipment and labor, the implementation of a finance lease, to raise prices, carry out marketing planning financial the dilated financial strategy, enterprises should take prudent financial strategy; when the economy in the prosperity of the late ; When the economy is in a recession phase, particularly low period, should be taken to stop the expansion of the sale of excess plant and equipment, reduce the employee, to stop the adverse production and stop the long-term procurement of defensive financial strategy.The corporate financial strategy should adapt to the enterprise product lifecycle. The development of enterprises has a certain regularity, and go through the start-up period, growth period, maturity and decline. [4]When enterprises are establishing the financial strategy, we must correctly grasp the stage of development and each of its stages of development stage characteristics. For instance, in start-up period, the financial characteristics of performance for the shortage of funds, the core competitiveness has not yet formed, when the financial management focus should be on how to raise funds to achieve corporate growth through self-development; in business growth and maturity period, the financial characteristics shows relatively ample funds, a relatively large core competitiveness has been basically formed, then the focus of financial management should be considered through the acquisition of its external development; recession in the enterprise, its financial characterized by sales The amount of profits has been a marked decline in the ability to pay significantly less than when the focus of financial management should be considered through reorganization, restructuring, to achieve its business transformation and rebirth. Thus, in the business start-up and growth stage, can be taken to the expansion of financial strategy at maturity can take sound financial strategy in a recession can only take defensive contraction of financial strategy.The corporate financial strategy of the company should match the resources of the company. Resources represent the assets and capabiliti es of enterprises, companies’ competitive advantages establish on the basis of unique resources owned by the company and its resources in a particular competitive environment matching, by this way, it affecting the formulation and implementation of corporate strategy andfinancial strategy.[2]Financial exposure is that the company's financial structure is irrational, and financing is inappropriate lead to make the company may be insolvent and the risk of investors expect earnings to decline. The financial exposure is a real problem that must be faced in the financial management process.[6] Financial exposure is objective, financial managers on the financial risk only can take effective measures to reduce the risk, but cannot eliminate risk entirely. The types of financial exposure Cathay Pacific might face are following.Financing riskFinancing risk refers to the uncertain financial risks due to changes in capital supply and demand market, the macroeconomic environment. Financing risks including interest rate risk, financial leverage, exchange rate risk, and purchasing power risk. Interest rate risk is a result of changes in funding costs due to the volatility of financial markets and financial assets. Financial leverage effect is the uncertainty due to corporate leveraged finance to the interests of stakeholders. Exchange rate risk is the risk to the enterprise due to exchange rate changes the outcome of the uncertainty of foreign exchange business; purchasing power risk due to currency changes to the impact of financing.Investment riskInvestment risk is that after businesses invest certain funds in a project, due to changes in market demand and affect, the risk of the final revenue deviation from the expected return. Enterprises’investing can be divided into direct investment and portfolio investment. Securities and investment are mainly two forms of equity investments and bond investments. Equity investments are mainly involve the risk and profit sharing forms of investment. Bond investment and the investment company's financial activities not directly related to only charge a fixed interest on a regular basis, are faced with the risk of investors unable to repay the debt.Operational risksOperational risks is that in the process of production and operations, supply, production, sales of all aspects of the uncertainty factors lead to the hysteresis of the enterprise funds movement, resulting in changes in enterprise value. Operational risks include the procurement risk, production risk, liquidity risk inventory, receivables and liquidity risk.Liquidity RiskLiquidity risk refers to the corporate assets cannot be normal and uncertainty to the transfer of cash or corporate debt and the possibility of cash the responsibility cannot be performed. The liquidity risk can generally be analyzed from two aspects of the liquidity and solvency of the enterprise and evaluation.The financial holding company establishes subsidiaries within a group, each subsidiary are separate legal entities, and are engaged in different financial business, so while achieving a separate operation of financial companies and the Group's consolidated operating. Subsidiaries can continue to work on other corporate financial holding subsidiaries between each other shares, thus forming a complete large-scale, business, close-knit one-stop financial supermarket - one-stop solutions for all your financial needs. Financial holding company has a great advantage in the business operation of capital, resources integration and cost savings, but in fact conglomeratization financial holding companies and huge organizations has a lot of risk, these risks driven by the financial holding company made a major innovation in corporate governance, financial management.As far as I am concerned, there are two main challenges Cathay Pacific Airlines face as it manages its financial holding.(1)Repeating the operation of over-funding, the tense capital chainFinancial holding companies through equity investments in subsidiaries holding, subsidiary and then to other companies holding funds have been repeated use, while providing the efficiency of capital, but too much repetition of shares of investment, the bigger the firm size control more huge size of funds, the parent company is indeed a serious shortage of funds, the longer the chain of funds and the greater the amplification effect of the capital, and thus the greater the risks posed.At the same time very close links between the various subsidiaries, especially the capital is closely linked when capital is not sufficient. A subsidiary losses hugely or go bankrupt, is likely to lead to funding strand breaks, and then damage the whole Holding Group.(2)Complex internal structure, low operational efficiency, the risk of moral hazard,and the difficulty of monitoringIf there are a number of subsidiaries at the same time, a variety of business and functional departments will cause a great waste of resources. Because of the huge structure, decision-making chain will be extended, decision conduction will be hindered. Each subsidiary also has the impulses of interest, impacting the implementation of the Group's overall strategy.Because of the massive group, internal assets, liabilities and transactions are very complex, its required information disclosure is very difficult, detrimental activities to market principles of the trading is likely to occur between subsidiary, and because of the wide variety of interests exists between the subsidiary relationship, the moral hazard of internal transactions is probably occurs.ConclusionA financial manager’s major work is managing the firm’s revenues, expenses, assets and liabilities. The financial manager in firms like Cathay Pacific Airlines must deal with the financial activities, investment activities and operating activities well because the funds of Cathay Pacific include government and corporate bonds, other fixed interest securities, short-term money market instruments and bank balances. As the trade becomes more and more global, the opportunities and challenges of Cathay Pacific are increasing. Under this situation, the financial manager must grasp the flash opportunities and deal with the crisis steadily.Reference/view/10715.htm/view/2267850.htm3./wiki/Financing4.Alan C. Shapiro, Foundations of Multinational Financial Management,fourthedition. John Wiley & sons, Inc. 2002urent L. Jacque, Management and Control of foreign Exchange Risk,KluwerAcademic Publishers, 19966.Cheol S. Eun &Bruce G. Resnick:, International Financial Management, secondedition, McGraw-Hill companies, 1998。