Question

Provide short answers to the Questions below, please note that the plagiarism software will also be used to assess the answers. 

Do pandemics such as Covid-19 affect the cost of money? 

In your opinion, has the goal of financial management has changed in times of crisis like the Corona Virus? Support your answer with examples. 

Answer 1

Pandemic definitely affects the cost of money. The cost of money means basically the nominal rate at which the funds are being raised by an organization. The nominal interest rate is sum of real interest rate and inflation. In this tough situation, the spending is affected and the purchasing capacity or inflation also reduces. Hence this is one factor that drags down the nominal rate. Also, as the spending is affected government tries to alter its monetary policy to improve the spending in the economy. This is the second factor for the reduction of cost of money.

The goal of financial management is to maximize the wealth of shareholders which never changes, irrespective of the kind of situation going around. So definitely we can say the goal of FM hasn't changed due to COVID. The CFOs are indulged in strategic planning as the spending has gone down, so in what possible ways the cost-cutting can be done. By cutting the cost they are improving the net profit and can maintain the profitability margins.

Example- Many companies have opted the work from home strategy which has reduced their operational cost a lot. Some companies are working with half of their workforce in every alternative day of shift. These are all done to reduce the cost of the company and improve the profit margin.