Question

What economic factors should the finance manager consider as he/she prepares the funding plan?

Answer 1

Economic factors, the financial manager should be considering when he is preparing the funding plan are as follows-

A. Monetary policy of economy- monetary policy of the central bank should be considered because it will be including the expectation of the central banks about the growth guidelines of the economy

B. Inflation forecast in the economy- economic forecast about inflation in the economy should be considered when the financial manager is considered about finding plan as it will be affecting the cost of the funding

C. Interest rate and yield curve- interest rates should be factored into before making a decision regarding the funding plan because interest rate will be affecting the cost of the funding to a large extent

D. Growth forecast of the economy and the economic cycle which are prevalent into the economy and the expected economic cycles should also be discounted before making a decision regarding funding of the company

E. Exchange rate of the country should also be considered if there is a relation with the International funding of the financial manager

F. Financial manager should also be considering the change in taxation policy and the fiscal policy of the central government and the subsidies and the bailout package also before deciding Upon A funding plan.