5. Fiscal Policy
Fiscal policy is used by governments and central banks to limit the extent of the business cycle. If an economy is moving into a recession, a reflationary fiscal policy might be used, when the economy is stimulated by increasing government spending or by cutting levels of taxes to increase the amount of money available for spending in the economy. If the economy is overheating (expanding too quickly), a deflationary policy may be used to cool down the economy. It involves raising taxes or cutting government expenditure, thus reducing the level of demand and the inflation.
6. Monetary Policy
Monetary policy can also be used by governments or central banks to influence the level of economic activity. Reducing interest rates increases the growth of money supply, boosting a
Показать всеn economy that is in a downturn. An economy that is growing too fast can be slowed down by increasing interest rates and reducing the rate of growth of the money supply. An independent central bank is created to prevent governments from creating a political business cycle that will be at a high point at the time of the next election, which is good for politics but not good for economic stability.
7. Business finance
Capital is money needed for setting up a company. It can be borrowed from banks. The loan is then paid back with interest. Capital can also come from issuing shares or equities. Buyers of shares are called shareholders (partial owners of the company) and they provide share capital. Investors can lend money to the company by buying bonds – loans that pay interest and are repaid at a fixed future date. Money owned is called debt (liabilities). Working capital or funds is the money available for spending for everyday expenses. Revenue is all the money coming into the company during a certain period. Revenue minus expenses is profit (earnings, net income). Companies pay some of its profit to shareholders, some as taxes and retain the rest. Financial statements describe financial situation of the company, for example, balance sheet, profit and loss account.
8. SWOT analysis
SWOT analysis is a method of analyzing an organization’s competitive situation that assesses organizational Strengths and Weaknesses, as well as environmental Opportunities and Threats. The results can be used when choosing an appropriate strategy for management of the organization. Strengths and weaknesses are internal characteristics. Strengths have the potential of improving company’s competitive situation, while weaknesses make the company potentially vulnerable to strategic moves by competitors. Opportunities and threats are environmental conditions. An opportunity offers significant prospects for improving company’s situation relative to competitors, whereas a threat offers significant prospects for undermining its competitive situation. Скрыть
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