Financial and Economic Literacy for Managers
Added on 2020-01-28
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Financial and Economic Literacyfor Managers
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Impact of Globalization.........................................................................................................31.2 Issues to Consider at Strategic Analysis................................................................................31.3 Comparison between Normal and Inferior Goods.................................................................41.4 Consumer Behavior in terms of Risk and Uncertainty..........................................................41.5 Cross elasticity of Demand....................................................................................................4TASK 2............................................................................................................................................52.1 Types of Market.....................................................................................................................52.2 Economic Concept of Public Good........................................................................................52.3 Business cycle........................................................................................................................62.4 Concept of Inflation...............................................................................................................6TASK 3............................................................................................................................................73.1 Financial Statements..............................................................................................................73.2 Ratio Analysis......................................................................................................................103.3 Management Decisions........................................................................................................113.4 Phases of Life cycle.............................................................................................................11TASK 4 .........................................................................................................................................124.1 Risk and Return....................................................................................................................124.2 Capital Structure..................................................................................................................124.3 3. Calculation of Amortization Schedule.............................................................................124.4 Interest Calculation..............................................................................................................134.5 Selection Of A Project........................................................................................................13CONCLUSION..............................................................................................................................15REFRENCES.................................................................................................................................16
INTRODUCTIONIn today's world, it is highly recommended that financial and economic literacy isessential for a sustainable economic and financial growth for an individual and for the company.Economic literacy deals with the concept of earning, spending, sharing and saving money. Onthe other hand financial literacy is the ability to understand how money is working, means howthe money is earned or how to make it(Cheema and Skultety, 2016). The interest in financialliteracy is increasing, and most of the programs, whether they are related to economic literacy orfinancial literacy, are initiated by the financial sectors. Here, we are observing the abc company'simpact of globalization on UK, the types of market, they are dealing with, and their basicfinancial statement. TASK 11.1 Impact of GlobalizationGlobalization is a process by which the organizations develop international trades.Globalization deals with the increased interdependence, and integration of global economy, thatwill further increase in trades, movement of labor and money/capital. Some of the effects whichwill be having on the economic literacy in UK arei) Global economic cycle: UK will be more affected by this, because they majorly rely onEU's export and imports. So if there is recession in Eu's export that will be having direct impacton UK's economy.ii) Migration: Globalization will make it very simple for migrants to work in UK, thus itwill fill up the vacant positions but at the same time it will affect the housing board and publicservice as there will be a rise in migrant population(Kramin and et.al., 2014).1.2 Issues to Consider at Strategic AnalysisStrategic Analysis is basically a method to identify the company's strenght, weakness,opportunity, and threats. A strategic analysis represents a firm's core competencies at the sametime identifying opportunities, and the current threats to the firm from the market(Luke, 2014).Certain issues the firm consider while undertaking strategic analysis are as follows:
- Complexity: all the managers, must take this into account while making any strategy,that upto which extent this can get complex. - Information Overload: while doing the planning, it might be possible that due to variousnumber of sources, the information can get overloaded(Choi and et.al., 2014). Company's team must find out all the possible threats and the competition from the market,otherwise the analysis can go wrong and this will reduce the company's reputation in the market.1.3 Comparison between Normal and Inferior GoodsAn inferior good is the type of goods, that decreases in demand when its income rises. Atthe same time, if the income is reduced then the demand will increase. In contrast to inferiorgoods are normal goods. Normal good is the good that increases in demand when income rises.Its to keep in mind that inferior goods are depend on the behavior and affordability of goods. Itdoesnt mean that it lacks quality, or the waste of money(Prete, 2013). For example, the usedbooks and noodles, the more income you are having, the less you buy used books or instantnoodles, These are inferior good. Normal goods are like clothes, the more your income is, themore number of clothes you buy.1.4 Consumer Behavior in terms of Risk and UncertaintyThere are certain theories by which we can easily analyses the behavior of the consumerin the risk and uncertainty conditions, they are- The Bernoulli Hypothesis: this is based on the flip of a coin. This theory was usedearlier as it has 50-50 side, one can flip the coin, if heads come first, he will get some money andgame stops, then if heads comes in the second time, he will get the money and game stops and soon. But there are chances of the other person loosing more money, if a person put 100rs on stakeon 10rs loosing, than he will not play this game, because of the uncertainty of loosing themoney(Reder, 2015).- friedman savage hypothesis: this is based on the expected values of utilities and doesn'trefer whether the marginal utility increases or decreases. When a person gets an insurance policy,he pays to escape or avoid risk, but when he buys a lottery he gets a small chance of large gain.1.5 Cross elasticity of DemandCross elasticity of demand measures the responsiveness in the demand quantity of onegood when a change in price takes place in another good. The cross elasticity demand for a
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