Transcript FDM - V2x
RECAP LAST CLASS ECONOMIC ENVIRONMENT FOR BUSINESS Maximisation of Shareholders wealth • ID • • • NEW PROJECTS ACQUISITION WORKING CAPITAL FD RAISING CAPITAL MINI COST OF CAPITAL DD PAY OR INVEST ECONOMIC ENVIRONMENT FOR BUSINESS • MICROECONOMICS • MACROECONOMICS MICROECONOMICS • BRANCH OF ECONOMICS THAT DEALS THE MARKET BEHAVIOUR OF INDIVIDUAL CONSUMERS AND FIRMS IN AN ATTEMPT TO UNDERSTAND THE DECISION-MAKING PROCESS OF FIRMS AND HOUSEHOLDS ECONOMIC ENVIRONMENT FOR BUSINESS MICROECONOMICS FOCUSES ON PATTERNS OF SUPPLY AND DEMAND AND THE DETERMINATION OF PRICE AND OUTPUT IN INDIVIDUAL MARKETS • E.G COFFEE INDUSTRY ECONOMIC ENVIRONMENT FOR BUSINESS MACROECONOMICS • BARNCH OF ECONOMICS THAT DEALS WITH PERFORMANCE, STRUCTURE AND BEHAVIOUR OF A NATIONAL OR REGIONAL ECONOMY AS A WHOLE. ECONOMIC ENVIRONMENT FOR BUSINESS MACROECONOMICS • INDICATORS SUCH AS GDP, UNEMPLOYMENT, NATIONAL INCOME, OUTPUT, CONSUMPTION, INFLATION, SAVINGS, INVESTMENT, INTERNATIONAL TRADE, INTERNATIONAL FINANCE. ECONOMIC ENVIRONMENT FOR BUSINESS WHAT ARE THE GOVERNMENT MACROECONOMIC POLICIES ARE? THE THREE MAIN TARGETS ARE USUALLY: 1. ECONOMIC GROWTH & HIGH EMPLOYMENT 2. LOW INFLATION 3. BALANCE OF PAYMENTS STABILITY ECONOMIC ENVIRONMENT FOR BUSINESS THERE THREE MAIN GOVT MACROECONOMIC POLICIES; 1. ECONOMIC POLICY 2. MONETARY POLICY 3. FISCAL POLICY ECONOMIC ENVIRONMENT FOR BUSINESS Q: HOW GOVT’S MACRO ECONOMIC DECISIONS CAN IMPACT ON BUSINESS? Q: HOW EACH OF THESE POLICIES WILL HAVE AN IMPACT ON A FIRM’S, INVESTMENT, FINANCING AND DIVIDEND DECISIONS? ECONOMIC ENVIRONMENT FOR BUSINESS Maximisation of Shareholders Wealth INVESTMENT DECISION • • • NEW PROJECTS ACQUISITION WORKING CAPITAL IMPACT OF GOVT ECONOMIC POLICY ON INVESTMENT DECISIONS TO ACHIEVE ECONOMIC GROWTH, LOW INFLATION, OR BALANCE OF PAYMENTS STABILITY ECONOMIC ENVIRONMENT FOR BUSINESS WHAT IS INFLATION INFLATION? • THE OVERALL GENERALL UPWARD PRICE MOVEMENT OF GOODS AND SERVICES IN AN ECONOMY IS CALLED INFLATION. • OVERTIME AS THE COST OF GOODS AND SERVICES INCREASES BECAUSE A PERSON WON’T BE ABLE TO PURCHASE AS MUCH AS WITH THAT RS AS HE/SHE PREVIOUSLY COULD. ECONOMIC ENVIRONMENT FOR BUSINESS BALANCE OF PAYMENT • A SYSTEMATIC RECORD OF A NATION’S TOTAL PAYMENTS TO FOREIGN COUNTRIES, • INCLUDING THE PRICE OF IMPORTS AND THE OUTFLOW OF CAPITAL AND GOLD • ALONG WITH THE TOTAL RECEIPTS FROM ABROAD, INCLUDING THE PRICE OF EXPORTS AND THE INFLOW OF CAPITAL AND GOLD ECONOMIC ENVIRONMENT FOR BUSINESS BALANCE OF PAYMENT • IT IS VERY DIFFICULT FOR A COUNTRY TO SPEND MORE ON IMPORTS THAN IT EARNS FROM EXPORTS FOR A SUSTAINED PERIOD OF TIME. • WHERE IMPORTS EXCEEDS EXPORTS THIS IS OFTEN CALLED A BALANCE OF DEFICIT, AND GOVT WILL OFTEN TAKE ACTION TO CORRECT THIS SITUATION USING THE POLICIES. ECONOMIC ENVIRONMENT FOR BUSINESS Maximisation of Shareholders Wealth FINANCING DECISION • • RAISING CAPITAL TO FINANCE MINIMISE COST OF CAPITAL MONETARY POLICY IMPACT OF INTEREST RATE POLICY ON THE DECISION TO BORROW MONEY ECONOMIC ENVIRONMENT FOR BUSINESS WHAT IS MONETARY POLICY? • CONTROL OVER THE MONEY SUPPLY AND THE DETERMINATION OF INTEREST RATE ECONOMIC ENVIRONMENT FOR BUSINESS • Maximisation of Shareholders Wealth DIVIDEND DECISION • PAY OUT OR INVEST FISCAL POLICY HOW MUCH GOVT WILL SPEND? HOW MUCH RAISES TAX REVENUE ECONOMIC ENVIRONMENT FOR BUSINESS FISCAL POLICY • HOW MUCH THE GOVT DECIDES TO SPEND, AND TO RAISE A TAX MONETARY POLICY • CONTROL OVER THE MONEY SUPPLY AND OF INTEREST RATES ECONOMIC ENVIRONMENT FOR BUSINESS ECONOMIC POLICIES • EXCAHANGE RATE POLICY IF THE VALUE OF THE RS IS FORCED DOWN IN VALUE, IT MAKES IMPORTS MORE EXPENSIVE AND EXPORTS CHEAPER • COMPETITION POLICY POLICIES TO ENCOURAGE COMPETITION E.G. BLOCKING TAKEOVERS • GREEN POLICY POLICIES TO ENCOURAGE PROTECTION OF THE ENVIRONMENT ECONOMIC ENVIRONMENT FOR BUSINESS Q: HOW TO ACHIEVING ECONOMIC GROWTH /HIGH EMPLOYMENT? FISCAL POLICY BOOSTING SPENDING: BIDDING FOR GOVT CONTRACTS --- THEREFORE HIGHER CONSUMER SPENDING --- MORE JOBS ---MORE SPENDING ECONOMIC ENVIRONMENT FOR BUSINESS Q: HOW TO ACHIEVING ECONOMIC GROWTH /HIGH EMPLOYMENT? FISCAL POLICY • CUTTING TAXES HIGHER PROFITS FROM INVESTMENTS ECONOMIC ENVIRONMENT FOR BUSINESS Q: HOW TO ACHIEVING ECONOMIC GROWTH /HIGH EMPLOYMENT? MONETARY POLICY INCREASING MONEY SUPPLY: HIGHER CONSUMER DEMAND LOW INTEREST RATES: MORE LIKELY TO USE DEBT FINANCE ECONOMIC ENVIRONMENT FOR BUSINESS Q: HOW TO ACHIEVING ECONOMIC GROWTH /HIGH EMPLOYMENT? EXCHANGE RATE POLICY LOWER EXCHANGE RATES: OVERSEAS SUPPLIERS BECOME MORE EXPENSIVE. EXPORTS MARKETS BECOME MORE ATTRACTIVE ECONOMIC ENVIRONMENT FOR BUSINESS Q: HOW TO ACHIEVE LOW INFLATION? FISCAL POLICY CUTTING SPENDING: LOWER CONSUMER SPENDING RAISING TAXES: LOWER PROFITS FROM INVESTMENTS. • DIVIDEND POLICY AFFECTED IF TAXES ON DIVIDEND RAISES ECONOMIC ENVIRONMENT FOR BUSINESS Q: HOW TO ACHIEVE LOW INFLATION? MONETARY POLICY HIGHER INTEREST RATES: LESS LIKELY TO USE DEBT FINANCE. CONSUMER DEMAND FALLS ECONOMIC ENVIRONMENT FOR BUSINESS Q: HOW TO ACHIEVE LOW INFLATION? EXCHANGE RATE POLICY HIGHER EXCHANGE RATES: EXPORTS MARKETS BECOME LESS ATTRACTIVE ECONOMIC ENVIRONMENT FOR BUSINESS SUMMARY • GOVT USE FISCAL POLICY, MONETARY POLICY AND EXCHANGE RATE POLICY TO ACHIEVE THEIR MAIN POLICY OBJECTIVES OF: 1. ECONOMIC GROWTH & HIGH EMPLOYMENT 2. LOW INFLATION 3. BALANCE OF PAYMENT STABILITY ECONOMIC ENVIRONMENT FOR BUSINESS SUMMARY • EACH OF THESE POLICIES WILL HAVE AN IMPACT ON A FIRM’S POLICIES : 1. INVESTMENT DECISION 2. FINANCING DECISION 3. DIVIDEND DECISION OVERVIEW OF FINANCIAL MANAGEMENT TITLES OF THE TOP MANAGEMENT OF THE FINANCE DEPARTMENT IN THE ORGANISATION • IMPORTANCE? • WHY YOU SHOULD KNOW THIS? OVERVIEW OF FINANCIAL MANAGEMENT 1. 2. 3. 4. VICE PRESIDENT FINANCE / FINANCE DIRECTOR FINANCIAL CONTROLLER / FINANCE MANAGER TREASURER FINANCIAL ACCOUNTANT/ MANAGEMENT ACCOUNTANT 5. FINANCIAL ANALYST 6. BUSINESS ANALYST OVERVIEW OF FINANCIAL MANAGEMENT 1. HEAD OF CREDIT CONTROL SECTION OR SUPERVISOR OF ACCOUNTS PAYABLE 2. HEAD OF ACCOUNTS RECEIVEABLE / SUPERVISOR OF ACCOUNTS RECEIVABLE 3. ACCOUNTS ASSISTANT 4. ACCOUNTS CLARK / DATA ENTRY