Question

Why should companies pay attention to economic factors when managing the organization’s current and future financial information?

Answer 1

Answer:

Company must pay attention to the various economic factors While managing the current as well as the future financial information

Companies attention are must for following economic factors

• Pricing factor
• Demand factor
• Supply factor
• Employment factor
• Inflation factor
• Existing laws etc

This factors are important because financial position or turnover of any Company are based on the products and turnover volumes but economic factors like pricing, supply, demand and inflation etc. are external deciding factors for any business for sustaining and expanding/developing within any market.

Pricing Factors:

This factor is based on the market price of the products which is sold by Company and based on this rates, fluctuations in exchange rate or foreign currency transactions which the Company may be engaged in. So company will decide for increasing or decreeing in the rates or price of its products accordingly and this will lead in higher or lower turnover, as the situation may be.

Demand and supply Factor:

Any product of the company are more or less dependent on the market condition or socio-economic conditions which is prevailing within any country in which the product are sold, and it last world at large (if export sales are there). Hence we can say that demand and supply factors also help to base for turnover for any Company and also in forecasting its future levels expected.

Employment Factor:

This factor will decide the level of labor employed within Company and also consider the consequently the labor cost, labor cost are part of the product cost which is sold.

Inflation factor:

This factor dependent on the world economy as well as nation's economy. If there is higher inflation rate is there then would lead in reduction in the price for products being marketed and vice-versa.