Economic factors

NATIONAL LEVEL

Gross Domestic Product

•Gross Domestic Product (GDP) is the broadest quantitative measure of a nation's total economic activity. More specifically, GDP represents the monetary value of all goods and services produced within a nation's geographic borders over a specified period of time.

GDP RATES

• The equation used to calculate GDP is as follows:• GDP = Consumption + Government Expenditures + 

Investment + Exports - Imports• The components used to calculate GDP include:• Consumption:

-- Durable goods (items expected to last more than three years)-- Nondurable goods (food and clothing)-- Services

• Government Expenditures:-- Defense-- Roads-- Schools

• Investment Spending:-- Nonresidential (spending on plants and equipment), Residential (single-family and multi-family homes)-- Business inventories

• Net Exports:-- Exports are added to GDP-- Imports are deducted from GDP

PERSONAL TAX

•In India, the Personal Income Tax Rate is a tax collected from individuals and is imposed on different sources of income like labour, pensions, interest and dividends. The benchmark we use refers to the Top Marginal Tax Rate for individuals. Revenues from the Personal Income Tax Rate are an important source of income for the government of India.  

Personal income tax rate

Taxes Last Previous Highest Lowest Unit

Corporate Tax Rate

34.00 33.99 34.00 32.44 percent

Personal Income Tax Rate

33.99 33.99 33.99 30.00 percent

Sales Tax Rate

12.36 12.36 12.50 12.36 Percent

corporate tax rate

•Definition•A tax that must be paid by a corporation

 based on the amount of profit generated. The amount of tax, and how it is calculated, varies depending upon the region where the company is located.

Balance of payments• The balance of payments (BOP) is the method

countries use to monitor all international monetary transactions at a specific period of time. Usually, the BOP is calculated every quarter and every calendar year.

• All trades conducted by both the private and public sectors are accounted for in the BOP in order to determine how much money is going in and out of a country.

• If a country has received money, this is known as a credit, and if a country has paid or given money, the transaction is counted as a debit.

•Theoretically, the BOP should be zero, meaning that assets (credits) and liabilities (debits) should balance, but in practice this is rarely the case. Thus, the BOP can tell the observer if a country has a deficit or a surplus and from which part of the economy the discrepancies are stemming.

Balance of trade• The difference between a country's imports and

its exports. Balance of trade is the largest component of a country's balance of payments. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad.

• Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy. A country has a trade deficit if it imports more than it exports; the opposite scenario is a trade surplus.

Monetary policy

• Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.

• The official goals usually include relatively stable prices and low unemployment. Monetary economics provides insight into how to craft optimal monetary policy.

Economic policy • Economic policy refers to the actions

that governments take in the economic field. It covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labor market, and many other areas of government interventions into the economy.

• Most factors of economic policy can be divided into either fiscal policy, which deals with government actions regarding taxation and spending, or monetary policy, which deals with central banking actions regarding the money supply and interest rates.

Govt incentives & subsidies• Measures taken by a government to attract

the development of industry in specified areas.

• These include grants for building, works, plant, and machinery, assistance in encouraging sound industrial projects,free rent of a government-owned factory for up to five years, taxation allowances against investments, loans, and contract preference schemes.

Fiscal deficit

•When a government's total expenditures exceed the revenue that it generates (excluding money from borrowings). Deficit differs from debt, which is an accumulation of yearly deficits.

Barriers To Entry

• The existence of high start-up costs or other obstacles that prevent new competitors from easily entering an industry or area of business.

• Barriers to entry benefit existing companies already operating in an industry because they protect an established company's revenues and profits from being whittled away by new competitors. 

• Barriers to entry can exist as a result of government intervention (industry regulation, legislative limitations on new firms, special tax benefits to existing firms, etc.), or they can occur naturally within the business world.

• Some naturally occurring barriers to entry could be technological patents or patents on business processes, a strong brand identity, strong customer loyalty. 

•E.g Government regulations - A rule of order having the force of law, prescribed by a superior or competent authority, relating to the actions of those under the authority's control. Requirements for licenses and permits may raise the investment needed to enter a market, creating an effective barrier to entry.

Barriers To Exit

•Obstacles or impediments that prevent a company from exiting a market.

•Typical barriers to exit include highly specialized assets, which may be difficult

•to sell or relocate, huge exit costs, such as asset write-offs and closure costs, and inter-related businesses, making it infeasible to sell a part of it. Another common barrier to exit is loss of customer goodwill.

• A company may decide to exit a market because it is unable to capture market share or turn a profit or for some other reason altogether. High barriers to exit might force it to continue competing in the market, which would intensify competition.

• Specialized manufacturing is an example of an industry with high barriers to exit, because it requires large up-front investment in equipment that can only do one task. 

•High barrier to entry and high exit barrier (for example, telecommunications, energy)

•High barrier to entry and low exit barrier (for example, consulting, education)

Unemployment in India

• Unemployment Rate in India decreased to 5.20 percent in 2012 from 6.30 percent in 2011. Unemployment Rate in India averaged 7.58 Percent from 1983 until 2012, reaching an all time high of 9.40 Percent in 2009 and a record low of 5.20 Percent in 2012.

• Unemployment Rate in India is reported by the Ministry of Labour and Employment, India.

• current unemployment rate: 8.8%

• USA 6.1% UK 6.5%

•The Government of India has taken several steps to decrease the unemployment rates like launching the Mahatma Gandhi National Rural Employment Guarantee Scheme which guarantees a 100 day employment to an unemployed person in a year.

•It has implemented it in 200 of the districts and further will be expanded to 600 districts. In exchange for working under this scheme the person is paid 150 per day.

Orgn levelnature of business•When filling out a form, "nature of

business" refers to the type or general category of business or commerce you are describing. For example, if you work at Microsoft, then the nature of your business is software. If you work at a restaurant, the nature of your business is food services

Size

• Size is many times the driving factor for a company organizational structure. Smaller or home-based businesses do not usually have a vast structure because the business owner is usually responsible for all tasks.

• Larger business organizations usually require a more intense framework for their organizational structure.

• Companies with more employees usually require more managers for supervising these individuals. Highly specialized business operations can also require a more formal organizational structure.

Ownership pattern

• Different businesses have their different forms of ownership.

• Some comes in the form of sole or single proprietorship;

• others are in the form of partnership; • others are in the form of corporation(5 up to 15

individuals) and • others are in the form of cooperative(25 or more

individuals).• These forms of ownership are different in many factors;

they differ from the ownership type, they differ in the division of labor, they differ in the amount of capital that is needed and they differ in many else.

Ownership pattern

Strategic Financial Managementintroduction

• Managing an organization's financial resources so as to achieve its business objectives and maximize its value.

• Strategic financial management involves a defined sequence of steps that encompasses the full range of a company's finances, from setting out objectives and identifying resources, analyzing data and making financial decisions, to tracking the variance between actual and budgeted results and identifying the reasons for this variance.

• The term "strategic" means that this approach to financial management has a long-term horizon. 

•At the most fundamental level, financial management is concerned with managing an organization's assets, liabilities, revenues, profitability and cash flow.

• Strategic financial management goes a step further in ensuring that the organization remains on track to attain its short-term and long-term goals, while maximizing value for its shareholders.