Monetary policy is the use of interest rates to manipulate the level of aggregate demand in the economy and loose (expansionary) monetary policy is a reduction in the interest rates. This will result in an injection of extra consumption because it is cheaper to borrow money on credit cards and therefore allowing consumers to spend more which will cause an increase in aggregate demand (AD). Additionally, extra consumption will allow shops to gain more profit preventing “business failures.” Furthermore, mortgages will be cheaper and therefore consumers feel richer and there will an extra injection of consumption. AD will also increase due to an increase in investment, causing an increase in aggregate demand from AD1 to AD2 as shown below. However,
All else being equal, cash received sooner is better. • The timing of cash flows a firm can generate is very important in determing the value of a firm. All else being equal, cash received later is better. • The timing of cash flows a firm can generate is irrelevant in determing the value of a firm. FCF= sales revenues-operating costs-Operation
Financial Analysis- Task 5 A. 1. Some key points of the company’s financial picture that could impact the bank officer’s decision are as follows: while there is an increase in gross profits from year 12 to 13, there is a decrease from year 13 to 14, also while the payroll and executive compensations steadily increases from year 12 to 14, advertising basically decreases, and services and utilities continue to increase as well as expenses in general. The operating income also has a major decrease from year 12 to 14, which is not good for the company as it indicates what is available to the company before a few other items need to be paid, such as preferred stock dividends and income taxes, which needs to be increasing for the company, not
Explain your answers. a. If a firm in the industry wishes to increase total sales revenue (ignoring cost considerations), will it raise or lower its selling price? Why? The selling price would only increase because the absolute value of -2.5 is 2.5 which are greater than 1 meaning it is elastic and an increase in price leads to a reduction in total revenue.
When the sales are increased for his division, bonuses could be paid to the managers. Frank Campbell reviewed the purchase orders received from November and December. He wanted to determine if any shipments to the customers before December 31 may increase their sales. The alternative way to report sales was to increase sales by sending out two shipments to customers. Although the customers only needed the shipment the following year, this would be a way to exceed the targeted budget.
As the demand for one product decreases it can cause a chain reaction lowering the demand for products needed to produce the first product. This cycle will continue until the demand for manufactures goods increased and its citizen’s put more capital back into the economy. This theory is true for any reason that people stop buying goods, if the demand goes down so does the supply and the money spent on the supply. In effort to stabilize an economy that is stuck in the decreasing demand and supply cycle the government should increase spending and find ways to increase individual spending across the country. As the capital is put back into the economy the demand for supplies will go up.
A type A merger would increase market power which would increase market share. Increase in market share would increase profitability. A merger is also recommended because with Smithon’s positive income can offset with Johnson’s negative income and would result in reduced tax liabilities. A merger redefines the business world which allows for improve corporate business strategies and philosophies along with stronger alliances and less competition. There are many reasons for a merger but the most important is to maximize its profits.
Net oncome does not tell the full story, nor does it truly represent the overall stability. In reviewing The Home Depot’s balance sheet the first item to present itself is the company´s reduction in present and long-term liabilities. The second thing is the almost six fold increase in the current installments of long-term debt. The company has eliminated nearly $1.7 billion in short-term debt, as well as successfully reducing the amount of payable income by nearly a billion dollars. This action will help the company down the road as fewer liabilities will result in less cash outflow, and place the company in a position to manage through the construction downturn.
When there is a greater disposable personal income this will allow consumption to increase due to the money saved from the lower tax rate. Through consumption increasing this will favour economic because the gross domestic product has increased. When government expenditures are increased it will have a multiplier effect on aggregate demand. Because of the multiplier effect, the government can increase spending by only a small amount to achieve a larger, necessary increase in aggregate demand. By doing so, the economy will be able to attain an equilibrium level of real
A tariff or tax is added to the price of the imported product. The result of this tariff is a higher cost to the consumer, which, in turn, decreases consumption. A positive consequence of this would be that fewer items are purchased or imported, which would logically increase domestic production. This approach is being discussed by some presidential candidates as an avenue for increasing jobs in the United States. It should be recognized