3. FINANCIAL RATIO ANALYSIS 3.1. PROFITABILITY (Ho, 2013) mentioned that the gross profit ratio assesses the gross profit generated per dollar sales. A drop in this ratio can signify more competition in the market, lowering selling prices or a higher cost of purchases. A rise in this ratio can signify that the firm has a competitive edge in the market and so it is able to charge higher prices for its products, or the firm is able to obtain its supplies at a lower cost.
When firms are optimistic about the future, investment spending increases, and vice versa. Marginal efficiency on investment (MIE) also contributes to the volatility of investment spending in investment. MIE is the expected rate of return over cost of an additional unit of a capital good. When MIE increases, investment spending increases because firms believe that they will get a higher return
The disadvantages in this system are high levels of black marketing and dishonest dealings because the government does not have full intervention to control these industries. Another disadvantage is that business owners must pay taxes that lowers their profits. They they also can't control how the government spends this money; it may go to benefit social programs, or on a cringing note, it can be used for
In comparison, a person with a higher level of income is likely to save this additional income rather than spend it. In other words, lower and middle income taxpayers have a higher marginal propensity to consume. This consumption (purchasing) of consumer goods is important, especially during economic slowdown, to spur economic activity. Therefore, increasing taxes for the wealthy instead of the middle class is favourable for the economy. Another argument refutes the claim that lower taxes for the rich encourage them to invest more which brings about economic growth.
This money is usually collected from the citizens of the state in as tax. So, it becomes practically dreadful for the government to run without the tax. Every state has his own way of gathering tax from its citizen. Lack of knowledge about tax has could lead us to a range of problems. These days, we cannot survive without money.
Lower debt levels will encourage the private sector to invest. Cutting budget deficits will give investors greater confidence about the long term performance of the economy. If budget deficits are not cut, it will lead to higher bond yields (e.g. as in case of Spain, Greece & Ireland). Higher deficit also increases the cost of financing the deficit which implies that the future generations will be paying interest on the current levels of debt.
One of the important reasons why one needs to invest wisely is to meet the cost of Inflation. Inflation is the rate at which the cost of living increases. The cost of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or service in the future as it does now or did in the past. The sooner one starts investing the better.
If the firm is operating at point Q1, P1 any increase in price for factors of production will lead to increase in price that is moving from point P1 to P2 quantity supplied decreases due to increase in cost for factors of production moving from Q1 to Q2. As firm’s main aim is to make and increase profits, they will need to increase price, and this causes
An overpayment can also be taken from money that you hold in a bank or other financial institution. (Citizensinformation.ie, 2014) Not paying back overpayments is also seen as a type of fraud. People are weary of the Social Welfare System because of these reasons and it hinders the trust between the recipient, the tax payer and the