A high ratio generally means that the company has been aggressive in financing its growth with debt. Such capital structure is likely to result in volatility in the earnings as a result of additional interest expense. This can also said to be a measure of the gearing level of the company. The optimum level of gearing is different to specific business sectors. For example, capital intensive industries such as logistics tend to have a slightly higher long term debt/equity ratio while electronics manufacturing companies have a relatively lower ratio The company had a debt equity ratio of 2.44 in FY 2011.
.3.3 Inflation Rate The inflation rate used as an indicator in measuring the stability of economic condition for a particular country (Rashid et al., 2011). In financial theory, inflation rate reflected by consumer price index (CPI) represents all the price of goods and services will go up and it need to take more money to buy the same items. Moreover, high inflation is likely cause a great impact on economic activities of a particular country because it reduces the purchasing power of domestic consumers and it would lead to currency value decline. The previous researchers believe that the inflation rate will influence the stock market return. There are many empirical studies establish that the inflation rate has an impact on stock market
Growth in internet retailing and online shopping: since Wal-Mart is the biggest offline retailer, it can use this opportunity as a way of expanding its presence in online realm to reach more customers and increase its revenue. Threats i. The rising price of commodities: as prices go up, the profit margins of Wal-Mart are squeezed and its competitive advantage is eroded. ii. Political pressure and foreign laws: changes in foreign law and pressure from politics affect the companies operation in other countries.
The analysis examines four areas of interest which are political and legal environment, economic environment, social and cultural environment and also the technological environment. It is very important for Volkswagen to identify their PEST analysis because this can provide a wider understanding of the business environment, for example, help the company to spot opportunities. Political Factors Volkswagen has face many political difficulties in its development as it is a company is not present in just two or three countries but more than 150 countries. Obviously Volkswagen is facing different political situation in different countries. Political situations of all the countries are not same and accordingly Volkswagen has to make its strategies like the political situation in Europe is different from Asian countries.
The working capital ratio measures the difference between the total current assets and current liabilities. My analysis of Boeing’s working capital ratio has shown a steady increase from $2.4 million in 2009 to $8.5 million in 2011. This is a positive indicator that the company has the ability to pay it liabilities. Boeing has a massive $374 billion backlog, amounting to five times 2011 sales. Such strong revenue visibility should allow the firm to adjust production rates and ride out economic downturns (Boeing website 2012).
Economic The economic conditions of a country play a critical role in the organization’s activities. It is reflected upon how a buyer and seller act in a market. With a boosting economy, the consumer has the power to purchase goods and services, and there is lesser unemployment in the country. During recession, stakeholders could back out from the company. But, during inflation, with high spending power, the company would acquire more stakeholders.
The supporting evidence given by the author about the political risks is political instability and uncertainty. It is relevance because political risks may arise from the changes in governments which bring the changes in policy, interest rates and regulations that can prove harmful to foreign business and investment. Besides, political risks may be caused by actions of legitimate government like control on prices, currency, outputs and activities. It may also result from incidents which are outside of government controls, for example war, terrorism, labor strikes, revolution and others. In addition, another supporting evidence stated by the author about the political risks in the article is an increasingly trend towards economic nationalism
The macroeconomic environment has a huge impact on the valuation of a company as we can see above, due to the different results. Dividend growth rates, cost of equity can be affected by the “outside” changes. If the economy as a whole is performing worse than expected, people won’t invest what they intended and the value of the stocks will go down. The macroeconomic variables; such as inflation, interest rates; can change unpredictably and even if the firm is doing well can be affected by the macroeconomic
The degree of natural disasters between different countries and regions also lead the different social changes between the countries. The shift from collecting, hunting and fishing to agriculture may have happened because, in some areas, the human population grew too large to be sustained by existing resources. 5. Economic & political advantage International shifts in economic or political advantage also have great impacts on social change. For example, ‘Globalisation’ & ‘the WTO’ are key factors in our modern society affecting the global economy, political structures and dynamics, culture, poverty, the environment, gender etc.
This segment is relatively price sensitive compared to industrial paints. Industrial paints are used for coating applications including automobiles, consumer durables, marine equipment and industrial components. Indian paint industry has the potential to grow at a CAGR of ~17.5% in next 2 years to become INR396bn industry by 2015-16. Indian paint industry growth is closely related with the GDP growth rate and has grown on an average1.5-2x GDP growth rate since