FDI’s are governed by long – term consideration become these investments cannot be easily liquidated. Hence factors like long term political stability, government policy industrial and economic prospects etc.
W.C.M : Working capital management deals with stock and flow perspective of w.c assets. In flow perspective we try to study the positioning of liquid funds. In stock perspective we try to determine appropriate levels and composition of cash balances, accounts receivables, inventories and short term debt. Thus in the w.c.m we deal with: (1) Positioning of funds (ii) Cash management (iii) accounts receivables management
(iv) and inventory management
Futures: A futures contract is a contract to buy or sell a stated quantity of a commodity or a financial claim at a specified price at a future date. The parties to the futures have to buy or sell the asset regardless of what happens to its value during the intervening period or what shall be the price on the date for which the contract is finalized.
Options: Options are contract which provide the holder the right to sell or buy a specified quantity of an underlying asset at a fixed on or before the expiration of the option date. It may be noted that the option provide a right and not the obligation to buy or sell. The holder of the options provide a right to buy or sell, there are two types of options.
(1) The Call Options: A call option provides to the holder a right to buy specified assets at specified price on or before a specified date.
(2) The Put Option: A put option provides to the holder a right to sell specified assets at specified price on or before a specified date. The specified price at which the option can be exercised is known as the strike price.
Swaps: Besides futures and Options , swaps are another important type of derivative. A swap is a transaction in which two or more parties swap (exchange) one set of predetermined payment for another. Swaps are of recent origin and two types of swaps have been evolved.
