The Benefits of a Single Currency System – Euro

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European Monetary System (EMS)

The euro is the result of the most significant monetary reform in Europe since the Roman Empire. Although the euro can be seen simply as a mechanism for perfecting the Single European Market, facilitating free trade among the members of the Euro-zone, it is also regarded by its founders as a key part of the project of European political integration.

The euro is administered by the European System of Central Banks (ESCB), composed of the European Central Bank (ECB) and the Euro-zone central banks operating in member states. The ECB (headquartered in Frankfurt am Main, Germany) has sole authority to set monetary policy; the other members of the ESCB participate in the printing, minting and distribution of notes and coins, and the operation of the Euro-zone payment system.

The introduction of a single currency for many separate countries presents a number of advantages and disadvantages for the participating nations.

1. Removal of Exchange Rate Risk

One of the most important benefits of the euro will be lowered exchange rate risks, which will make it easier to invest across borders.…

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International Equity Investments – Euro Equities

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International Equity Investment

International equities or the Euro equities do not represent debt, nor do they represent foreign direct investment. They are comparatively a new financial instruments representing foreign portfolio equity investment. In this case, the investor gets the dividend and not the interest as in case of debt instruments. On the other hand, it does not have the same pattern of voting right that it does have in the case of foreign direct investment. In fact, international equities are a compromise between the debt and the foreign direct investment. They are the instruments that are presently on the preference list of the investors as well as the issuers.

Benefits to Issuer/ Investor

The issuers issue international equities under certain conditions and with certain objectives. First, when the domestic capital market is already flooded with its shares, the issuing company does not like toad further stress to the domestic stock of shares since such additions will cause a fall in the share prices. In order to maintain the share prices, the company issues international equities.…

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How to Setup/Register a Private Limited Company in India

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Register a private limited company in India

We are going through a “startup revolution” in India, where every Arjun, Bheem & Nakul pampers an ambition to start his/their own company. So lets see how to get started with registration process to setup a company in India. There are 4 forms of legal entity available in India to register a business – 1) Proprietorship 2) General Partnership 3) Limited Liability Partnership(LLP) and 4) Private Limited. For any startup which wishes to get a funding/investor, the ideal form of registration is “private limited” because it has a solid structure and an organized share distribution system. All investors from Angel investors to Venture capitalists prefer “private limited” companies because of its transparent & legally valid share distribution structure.  So in this article, lets see how to setup and register a private limited company in India.

There are 2 ways in which you can go forward with the registration process of your company. One by doing every step yourself without much external help (but you need the help of a Chartered Accountant or similar professionals to get your DIN, Digital Signature etc).…

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Demand and Supply for Foreign Exchange

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The demand of foreign exchange

The foreign exchange rate is determined in the free foreign exchange markets by the forces of ‘demand for and supply for foreign money’. To make the demand and supply functions to foreign exchange, like the conventional market demand and supply functions, we define the rate of exchange as the price of one unit of the foreign currency expressed in terms of the units of the home currency.

The Demand for Foreign Exchange

Generally, the demand for foreign currency arises from the traders who have to make payments for imported goods. If a person wants to invest his capital in foreign countries, he requires the currency of that country. The functional relationship between the quantity of foreign exchange demanded and the rate of foreign exchange is expressed in the demand schedule for foreign exchange (which shows the different rates of foreign exchange). It is understood from the demand schedule that the relationship, between the quantities of the foreign exchange demanded that the rate of foreign exchange is inverse in such a way that a fall in the rates of exchange is followed and inverse in the quantity of the foreign exchange demanded.…

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Theories of Foreign Exchange

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Theories of Exchange Rate

Every country has a currency different from others. There is no common medium of exchange. It is this feature that distinguishes international trade from domestic. Suppose the imports and exports of a country are equal, the demand for foreign currency and its supply conversely, the supply of home currency and the demand for it will be equal. The exchange will be at par. If the supply of foreign money is greater than the demand it will fall below par and the home currency will appreciate. On the other hand, when the home currency is in great supply, there will be more demand for the foreign currency. This will appreciate in value and rise above par.

Economists have propounded the following theories in connection with determination of rate of exchange. 

1. Mint Par Theory

Mint par indicates the parity of mints or coins. It means that the rate of exchange depends upon the quality of the contents of currencies. It is the exact equivalent of the standard coins of one country expressed in terms of standard coins of another country having the same metallic standards the equivalent being determined by a comparison of the quantity and fineness of the metal contained in standard coins as fixed by law.…

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Balance of Payments (BoP) Accounting

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Balance of payments (BoPs) is systematic statement that systematically summarizes, for a specified period of time, the monetary transactions of an economy with the rest of the world. Put in simple words, the balance of payments of a country is a systematic record of all transactions between the ‘residents’ of a country and the rest of the world.

Three main elements of actual process of measuring international economic activity are:

  1. Identifying what is/is not an international economic transaction,
  2. Understanding how the flow of goods, services, assets, money create debits and credits, and
  3. Understanding the bookkeeping procedures for BoP accounting.

Each transaction is recorded in accordance with the principles of double-entry book keeping. That is every transaction is recorded based on accounting principle. One of these entries is a credit and the other entry is debit. In principle, the sum of all credit entries is identical to the sum of all debit entries, and the net balance of all entries in the statement is zero. Exports decreases in foreign financial assets (or increases in foreign financial liabilities) are recorded as credits, while imports increases in foreign financial assets (or decreases in foreign financial liabilities) are recorded as debits.…

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