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Q2. Explain foreign exchange market. Write about all the types of
foreign exchange markets. Explain the participants in foreign
exchange markets.
Answer. Foreign Exchange market (forex market) deals with purchase
and sale of foreign currencies. The bulk of the market is over the counter
(OTC) i.e. not through an exchange which is well regulated.
International trade and investment essentially requires foreign markets. Banks
act as intermediaries and perform currency exchange transactions by quoting
purchase and selling prices.
In India the Foreign Exchange Management Act (FEMA) 1999 is the law relating
to forex transactions and its aim is to develop, liberalize and promote forex
market and its effective utilization.
Q5. Explain the contents of working capital. Write down the need for
working capital.
Answer. As stated above, working capital comprises the working assets of a
firm. What are these assets? Look at the items in these examples.
1. A trading business for instance may have to purchase and store products
to be sold, paying for them before they can be sold and cashed. A factory
that produces and sells products has to store raw materials and finished
goods, besides having some unfinished materials under process.
2. A company may also need to allow the customers to pay later instead of
insisting on cash at the point of delivery.
together two or more activity domains and achieves a total effect that is
greater than the sum of all the individual domains.
Thus a decision related to money market instruments, for example, is taken
after reviewing possible forex actions that could enhance the benefit of the
decision.
Fall-2016