The Business Enviromment Flashcards
What is the GDP?
The GDP quantifies the volume of economic activity.
Which are the assets whose price evolutions have the greatest impact on the way financial managers forecast their budgets?
- raw materials
- salaries
- energy (oil, gasoline, electricity)
- foreign currencies
What are some factors that influence private consumption?
- Expectations regarding future prices
- Stock market changes
- Social trends, culture
- Consumerism (ex: black friday)
What is the main objective of a monetary policy?
- Mantain price stability
- Stimulate economic growth
- Mantain low unemployment rates
What are the dimensions of a business environment?
- The micro environment: ex, local market for a product
- Macro/regional
- Global
What is the difference in investments when comparing firms to individuals?
- For individuals: investing = savings
- For firms: investing = purchasing
If an individual buys a laptop = consumption
If a firm buys a laptop = investment
What factors significantly influence the business environment?
- Behavioral and psychological features of individuals
- Quality of the justice institutions and the rule of law
- Country development
- Public education and health systems
- etc
What is the role of fiscal policy?
- Control public revenues and expenses
Why is the business environment important?
The quality/characteristics of the business environment influences the development of a firm’s operations and financial performance.
What are some sources of data when determining the quality of a business environment?
- Macroeconomic variables
- GDP
- CPI
- Inflation
- Unemployment rates
- Investments etc
- Surveys
- offers informations about future customer demand, difficulties, opportunities
These act as indicators for future economic conditions.
What are the effects of increasing the minimum wage?
Increasing minimum wage would increase the cost of employing low-wage workers.
As a result, some employers would employ fewer workers. This also causes inflation, because the cost of producing goods/services goes up as companies pay their employees more.
What are the two essential policies?
- Monetary policy
- Fiscal policy
Who formulates/performs the monetary policy?
- National/regional central banks (NBR - for Romania)
- Euro-zone countries: European Central Bank
Who formulates/performs the fiscal policy?
- Central/federal governments
- Local/state/land authorities (city, county)
What are the monetary policy tools?
- Open market operations (buy/sell short-term T-bills)
- Credit/deposit facilities for commercial banks
- Minimal reserves rates
- Credit regulations imposed to the commercial banks
- Moral suasion (recommendations)
