Question

John also happens to be an avid reader of the financial statements of X Co. and wonders whether the information in the Management Discussion and Analysis section has any usefulness. He investigates and learns that when the economy has been good, management has forecast good prospects for the firm 95% of the time. When the economy has been bad, management has forecast good prospects 50% of the time.  These predict good times ahead.  

What is John's revised belief that the economy will be good?

Answer 1

John revised belief that the economy will be good is addressed by his theories regarding the economy to his theories. He believes in providing full employment and considers government interference as a way to stop economic recession. According to john, there is a close relationship between economy growth and management prospects. The economic theories, he believed that government plays an important role in a economy to be called good by increasing the taxes and increase the spending.

Yes, Management discussion and analysis (MD&A) is an important sector for providing useful information for the economic growth in the following ways:

1. Surveys and annual reports of company’s management imply that higher management quality will leads to more productivity, profitability and growth. This also helps to increase longevity of firms.

2. The workers are also needed to be skilled; this means that employing more employees will also help to improve the skills of the employees. Therefore, management of the businesses has a direct relation with economic growth.

3. The economy grows at a faster pace if the management has forecasts good prospects. On the other hand the economy face challenges when the management show less good prospects.

4. Organization structures, competition, workers, and planning seem to be important in examining the quality of management practices.

So, john advocated that the best method to pull an economy out of a depression is for the government increase demand by infusing the economy with capital to spend. This also shows good management prospects ahead.