Impact of Macroeconomic Factors on Company Performance

REPORT ON ECONOMICS

EXECUTIVE SUMMARY
The report summarise about impact of macro and micro factors on chosen company's
performance. In addition financial performance of company is analysed and suitable
recommendations are given so that deficiencies can be enhanced. The end part of report
summarise about different investment appraisal techniques.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
1.0 INTRODUCTION.....................................................................................................................4
2.0 Identify and evaluate the impact of economy on business organisations..................................4
2.1 Supply and demand of goods................................................................................................4
2.2 Micro factors.........................................................................................................................5
2.3 Macro factors........................................................................................................................6
3.0 Financial information of the organizations................................................................................8
3.1 Profitability Ratios................................................................................................................8
3.2 Liquidity ratio........................................................................................................................9
3.3 Leverage Ratio....................................................................................................................10
3.4 Efficiency Ratio..................................................................................................................11
4.0 Investment Appraisal Techniques ..........................................................................................12
4.1 Payback Period ...................................................................................................................12
4.2 Net Present Value................................................................................................................13
4.3 Internal Rate of Return........................................................................................................14
4.4 Accounting Rate of Return..................................................................................................15
5.0 CONCLUSION........................................................................................................................16
6.0 RECOMMENDATIONS.........................................................................................................17
REFERENCES..............................................................................................................................18

1.0 INTRODUCTION
The term economics is a key aspect of external which has a significant impact on
financial performance of business entities (Persson and Tabellini, 2016). In the project report a
company has been chosen that is Mother care plc. This company is a British retailer that provides
products for expectant mothers and for children up to 8 years. It is listed on London stock
exchange. In January 2019, Mother care plc faced that about 79 stores in UK, refused to take
products from them. The reason of this lower sales was increasing in online sales and increased
competition.
2.0 Identify and evaluate the impact of economy on business organisations.
2.1 Supply and demand of goods.
 Principle of supply and demand:
Principle of supply- The supply can be defined as amount of goods and services are
available to customers. It is based on a principle which is that keeping other factors
constant, a raise in prices may lead to increase in supplied quantity. In the aspect of above
mother care plc, if price of their products will raise then supply of products will also
increase vice versa.

Principle of demand- In the economics, demand can be defined as quantity of goods and services
which consumers like and able to buy at different prices during a particular time frame. Principle
of demand states that if prices of goods and services will increase then demand will decrease,
vice versa. In the aspect of above company, if they will decrease prices of products then demand
will raise.
 Elasticity of demand and supply-
Elasticity of demand- It is defined as a variation in price of a product which affects the
demand. This is computed by % change in quantity demanded by % change in a variable
on that demand depends.
Elasticity of supply- This is defined as % change in prices to % change in quantity
supplied of a particular commodity.
2.2 Micro factors.
The micro factors have a significant impact on companies financial performance. In the
aspect Mother care company, these factors can affect in such manner:
 Impact of immigration- In the case when there is no immigration then labour rate will be
higher and if there will be immigration then labour rate will fall down. In the aspect of
above company, they can be affected from this factor if rate of labour will fluctuate due
to higher immigration.

 Number of job increases- In addition, if number of jobs increases at the time of
immigration then labour force will be agree to do job at lower rate (Sahlins, 2017). In the
Mother care company, they can fulfil their vacant posts in the case when there is
immigration.
2.3 Macro factors.
Along with the micro factors, macro factors also affect companies performance. This is
so because: Unemployment- This is a key factor of an economy that can impact to financial
performance of companies. It is so because in a nation if unemployment rate will higher
then this will be difficult for corporations to provide jobs to freshers and attract more
number of customers because of lack of source of income. Along with demand of goods
will also lower. Below data of unemployment of UK in last three years is mentioned
which can affect above chosen company:
Year Unemployment rate
2016 4.9
2017 4.4
2018 4.1