Question

Macroeconomic Conditions and Company Performance: RE: Walmart, Neighborhood Market

a) Describe the trends of Net Profit And Total Revenue over the past three years.

b) Analyze the relationship between Net Profit And Total Revenue (performance variables) and Unemployment, Inflation, and Interest Rates (macroeconomic variables) for the past three years. Include Any relating graphs or suggested graphing methods**

c) Assess how the current monetary policy and fiscal policy in the United States may impact Walmanr't Neighborhood Markets financial performance in the short term (six months to one year). Justify your response.

Answer 1

C) Effects of fiscal policy on business (Walmart):

As we know fiscal policy is government adjustment of its spending & taxation. If government adopts expansionary fiscal policy to boost economic growth it will increase its spending & reduce taxes. As a result money supply will increase in the economy. This will increase demand for goods & services. As demand increases production will also increase & company may need to hire more people. Walmart will get more business as people will have more money to spend at stores which results in higher profits. Walmart will find it easy to borrow money for the purpose of expansion of business to other regions. Due to the reduced taxes profit margins will increase as more money is saved.

If government adopts contractionary monetary policy by reducing its spending & increasing taxes it results in decreasing money supply in the economy. This will decrease demand for goods & services. If demand decreases definitely production will decrease. Walmart will get less business as people have less money to spend. This results in lower profits. As the tax rate increases profit margins will decline.

In another case if due to increased spending & reduction in taxes leads to crowding out effect then Walmart will find it difficult to borrow money for spending & investment.