Venture Capital
Andrea Alms Video: Money In Motion 64 - FX Market Review Analysis - Part 2
July 2023 - Venture Capital
TRANSCRIPT: Hello, my name is Andrea Alms. I'm a technology investor and financial manager and this is your money in motion. On the last episode, we explored the foreign exchange market, specifically the revenue analysis. What is it? Foreign exchange or effects is the trading of one currency for another on a daily basis. Actual transactions are in the multi trillions with T per day. By contrast, the stop market at the trades at the multi-billion with B per day, it is so vast, every single person, every single company and every single government via its central bank are in the world contribute to it what are the advantages and disadvantages flexibility trading options, transaction costs, leverage disadvantages counterparty risk leverage risk operational risk. For example a foreign exchange transaction gain occurs when the transaction currency is different than the reporting currency for the company. On the initial transaction date, they record the $100 sale with a debit to account receivables and a credit to revenue. However, 30 days later, when the customer goes to pay using the current exchange rate, the increase means the company will collect $105 instead of $100, which represents the foreign exchange gain. To record the foreign exchange transaction gain, the company will debit cash for $105 credit Foreign exchange gain for $5, and then credit account receivables for $100. This is a simple example. And again, of course the reverse is true for a loss. Now wrap this simple example around the globe. 24 seven This is how money is made and this trillion dollar market separately, all those money flows. There are huge traders that facilitate all these company transactions and make a tiny margin. All those tiny margins trade millions times a day on trillions of dollars, end up making a large amount of money for the Financial Institute around the globe. Thank you. This is your money, your money, in motion.