Question

What macroeconomic variable do you think corporate financial managers should be preparing for in the next 5 to 10 years? What concepts and/or skills learned in this class will prepare you for the impact of this variable in your professional or personal life? Please explain and provide specific examples.

Answer 1

The macroeconomic variable that corporate financial managers must be formulating in the next 5 to 10 years is inflation. It’s is predicted that inflation rates are going to upsurge in the next 5 to 10 years. The increase in inflation might see a growth in ambiguity and costs. High inflation also adversely affect a firms profits. It could also put an end to the shareholder worth of the corporation and lead to high salary costs. Financial managers need hence to prepare themselves in numerous methods to counter these likely undesirable influences of high inflation. They can arrange themselves in the following ways:

i. Evaluate the perils of inflation to their corporation for example through all-inclusive risk analysis

ii. Develop an in-depth understanding of their real prices and costs

iii. Construct plans to guard profit margins and their investment programs.

Concepts and/or skills learned

Concepts of inflation rates and interest rates would help me prepare for the effect of high inflation in both my professional and personal life.

In my professional life, high inflation is expected to lower the procuring power of my wages thus making it comparatively of little worth. I will therefore discuss with my employer to feature in the inflation rate when defining my future salary.

In personal life, high inflation will worsen my purchasing power as a consequence of upsurge in prices of goods and services. I would use the talents learned to generate a budget that would take into thought the shifts in product prices.