A general increase in the price levels is known as inflation. According to the U.S. Bureau of Labor Statistics, consumer prices in the United States went up 1.5 percent year-on-year in September of 2016, the highest inflation rate since October of 2014. This was so due to boost provided by robust gains in shelter combined with a smaller drop in energy prices and the lowest food cost in over six years. Figure 11 below highlights the trend in the US inflation in the last five years. Figure 11: US Inflation Rate from 2011 to 2016 as according to the data provided by the U.S. Bureau of Labor Statistics.
A few of the impacts of changes in inflation levels on businesses are highlighted below:
1. Impacts Aggregate Demand: As income does …show more content…
Impacts Required Returns by Investors: Due to an increase in inflation, interest premium required by investors will increase. As a result, if companies cannot accommodate the return requirement, it will become more difficult to source finance for business operation and growth.
3. Currency appreciation or depreciation in the Forex Market: A rise in domestic price level will lead to imports becoming more favorable than exports. As a result, when inflation increases, currency tends to depreciate and vise-versa.
4. Purchasing Power Parity: A rise in inflation will decrease the purchasing power of disposable income of the consumer. Hence, consumers may experience a lower standard of living due to not being able to afford as …show more content…
Increase market liquidity of stock: A lower priced stock is easier to sell than a higher priced stock.
2. Indicates a company is doing well: As stock splits occur when shares prices are increasing, this signals to investors that a company still wants to make its shares available to investors who may not be able to purchase it otherwise.
3. No actual impact on the market: Stock splits do not impact an investor’s return, the company’s profit margins nor increase competitiveness, hence, stock splits do not impact the financial markets.
18. M&A, Corporate Spinoff:
An acquisition occurs when one company takes over another and becomes the new owner. In contrast, a merger is less hostile as it involves consent of both companies agree to go forward as a single new company rather than remain separately owned and operated. Unlike in acquisitions, both companies ' stocks are surrendered and new company stock is issued in its place.
A few of the impact of mergers and acquisitions on businesses are highlighted below:
1. Synergy: Usually, the result of the merger or acquisition is greater than the sum of two parts. For instance, the talent of the workforce of company A may be able to better use the resources of company
A few of the impacts of changes in inflation levels on businesses are highlighted below:
1. Impacts Aggregate Demand: As income does …show more content…
Impacts Required Returns by Investors: Due to an increase in inflation, interest premium required by investors will increase. As a result, if companies cannot accommodate the return requirement, it will become more difficult to source finance for business operation and growth.
3. Currency appreciation or depreciation in the Forex Market: A rise in domestic price level will lead to imports becoming more favorable than exports. As a result, when inflation increases, currency tends to depreciate and vise-versa.
4. Purchasing Power Parity: A rise in inflation will decrease the purchasing power of disposable income of the consumer. Hence, consumers may experience a lower standard of living due to not being able to afford as …show more content…
Increase market liquidity of stock: A lower priced stock is easier to sell than a higher priced stock.
2. Indicates a company is doing well: As stock splits occur when shares prices are increasing, this signals to investors that a company still wants to make its shares available to investors who may not be able to purchase it otherwise.
3. No actual impact on the market: Stock splits do not impact an investor’s return, the company’s profit margins nor increase competitiveness, hence, stock splits do not impact the financial markets.
18. M&A, Corporate Spinoff:
An acquisition occurs when one company takes over another and becomes the new owner. In contrast, a merger is less hostile as it involves consent of both companies agree to go forward as a single new company rather than remain separately owned and operated. Unlike in acquisitions, both companies ' stocks are surrendered and new company stock is issued in its place.
A few of the impact of mergers and acquisitions on businesses are highlighted below:
1. Synergy: Usually, the result of the merger or acquisition is greater than the sum of two parts. For instance, the talent of the workforce of company A may be able to better use the resources of company