Purchasing Power Parity Purchasing power Parity (PPP), is called relative purchasing power index which is according to different countries pricing level to calculate out an equivalent index value for different currencies. It helps able to compare the GDP of counties from the economics view, although there is a great difference between theoretical exchange rate and the actual exchange rate. The unit for the PPP theory is international dollar (Intl. $) or international currency unit (ICU). The PPP is dollar-based, that the purchasing power of $ 1 in the United States as a reference base.
Economic growth is defined as the increase in the ability of an economy to produce different goods and services. It is commonly measured through the Gross Domestic Product (GDP) percentage increase for a certain period of time. The question of the determinants of economic growth and the factors influencing it have been discussed in several ‘old’ and ‘new’ theories along the passage of time. These theories or models attempt to explain how an economic growth can occur, the reasons behind it and the role certain variables play in influencing the outcome. Savings in its most basic economic term is described as income that is not consumed.
Therefore, there is a risk, which may cause investors to remove investments causing a huge fall in value of the country’s currency. Policies that can address long term current account involves: 1. Currency Weakness- Depreciation in exchange rate might make exports more competitive and become cheaper to foreigners, which will increase demand for exports. This could also cause higher economic causing an increase in aggregate demand. 2.
labour, land, capital and enterprise respectively for their productive services in an accounting year. According to this method, the income received by the residents of a country for their productive services during a year is added up to obtain national income. Thus, income method consists of adding together all the incomes that accrue to the factors of production by way of wages, profits, rents, interest and other values. This gives the national income classified by distributive shares. However, transfer payments and capital gains are excluded from NI.
One of the approaches is the traditional incremental budget and the other one is the zero based budgeting. In the first case just as the name states, the budgetary allocation is done as an increment from the previous period. The traditional incremental budget entails that a department within a firm has access to as much resources as it can spend (Warrick & Zawacki, 1984, p.277). That is to say if a department uses all the financial resources allocated to it, it can apply for more finances to take care of other operations which could otherwise not have been budgeted for. Similarly, if a department realizes that it has some unused resources within a stipulated period, then the managers can look for ways of spending the resources until the accounts read zero.
Return on Assets Formula: The return on assets ratio formula is calculated by dividing net income by average total assets. This ratio also corresponds to the total asset turnover and product of the profit margin. Either formula can help you find out the return on total assets. Generally, average total assets are preferred because asset totals can fluctuate during the accounting year. You don’t have to do a lot, just sum up the beginning and ending assets on the balance sheet and divide the answer by two, and there you'll have your average assets for the year.
Financial Leverage A business’s financial leverage ratio represents how much of the company’s capital comes from debt. This is another way of assessing a business’s capacity to meet financial obligations. The following are calculations performed to determine Apple’s financial leverage: Once the financial leverage has been calculated a return on equity (ROE) can be calculated using a DuPont Analysis. The following is a DuPont Analysis calculation of ROE for Apple: A company 's financial performance can be measured by using economic value added (EVA). Economic profit is a performance measure between return on invested capital and the cost of capital, multiplied by the invested capital.
GDP calculated in this way is sometimes called as gross domestic incomes (GDI). However, by using this method, there are few adjustments must be made to arrive the GDP. According to Money Crashes website, indirect taxes must minus tax subsidies to arrive at market prices. Then, depreciation of asset must be added to get the GDP
With low income, one may not be able to save, since he needs to spend for the basic needs. However, as incomes rise, people can afford the luxury of saving a higher proportion of their income. Therefore, as income rise, spending increases at a lower rate than disposable income. People with high incomes have a lower average propensity to
However, this theory cannot take into account the fluctuations of forex rate. Hence, another theory called overshooting model by late Rudiger Dornbuschis was proposed. This theory explains that a currency appreciates more in the short-run than in the long-run. This can take into account the fluctuations of the forex rate. However, predicting the short-run is complicated and this is viewed by economists as a random walk.