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FELM4026 Financial And Economic Literacy For Managers Assignment

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FELM4026 Financial And Economic Literacy For Managers Assignment

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Course Code: FELM4026
University: University Of Phoenix

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Country: United States


At the end of a module students will be expected to be able to: 
1.Explain the principles of business and financial economics in an international context.2.Identify and explain the impact of governmental, monetary and economic policy on decision making in a business context.3.Describe and apply macro and micro concepts and models to business decision making.4.Interpret financial information (external and internal) and apply to decision making within a business context.5.Discuss the rationale and impact of decisions for business strategies to users and stakeholders.6.Examine and discuss the relationship between theory, and application in business and financial economics in an international context.

One of the system analytical framework which is used by the business people with a specific end goal to discover the connection between the market structure through investigating the market execution and directing statistical surveying of a said business element is Structure Conduct and Performance Paradigm (SCP) is one of the diagnostic system (Fan et al. 2017). For better exploration of the same, Toyota car manufacture will be chosen for this report.
Toyota and SCP:
SCP is made of Structure, Conduct and Performance that characterize generic public policies of the firm. Structure is the arrangement of those factors those are potential to influence the conduct of the business under various economic situation (Ralston et al. 2015). Direct is the path by which merchants and purchasers act among themselves, and the performance is estimated through examination of the specific association’s business execution within the industry. Introducing the SCP within the Toyota Car Company, it can be seen that the firm works in a very focused market, which is oligopoly in nature. Collusive pricing strategy is utilised by the competitors, firms rehearse predatory policy of pricing so as to gain highest profit from the market (Lelissa and Kuhil 2018).  Toyota work in such a market, where it needs to go up against an extensive assortment of firms which work under separated cost structure and has diverse hardware, mark picture, fuel productivity and different factors with the their products.  In this way the bargaining power of the purchasers is high and after that it goes to the producer, under the moderate number of competitor as well as low forward integration, bargaining power of the supplier is low (Tamasy 2017). Under the low exchanging expense and direct substitution accessibility makes the substitution a direct power in the market.
Globalisation and growth strategy:
As it can be seen that Toyota is one of the most established auto producer and throughout the years it has expanded its business system in different part around the world. For example, European market of Toyota use the Merger and Acquisition strategy in order to grow their business and market share. when it comes to US market of Toyota, then it can be seen that, the manufacturer focus on the fuel efficiency and when it comes to the  Australian market, it use the large scale production strategy in order to keep the cost of the product sensible and gather profit through higher output (Coleman 2016). Through looking into the Corporate Social Responsibility the firm keeps up a decent brand picture in various places of the world and through globalization channel the brand has exchanged fundamental advances in various market that has empowered it to accomplish upper hand over alternate brands.
In case of the managerial economics, SCP is one of the largely utilised brand and when it comes to the Toyota, then it can be seen that brand has utilised the same so as to reach the zenith of the success in different region.v
Framework of supply and demand is one of the essential apparatuses that guides to decide the balance level of output and cost of production. Uncertainty in the demand and supply framework can change the market condition which will change the financial stability as well as instability in goods and commodity as well as the labour market too (Kumar 2016). Moreover, there is probable shift in the consumer behaviour due to change in the market situation that can alter the market balance too.
Framework of demand and supply of normal good:
Demand is the willingness to have a good or service for which purchasers depicts economic preference and when it comes to the supply, then it is aggregate supply of the goods or services. If there is a rise in ordinary good demand, supply tends to fall and if there is a fall in the demand of normal good with rise in price, then supply will rise (Hibino et al. 2017). As it can be seen from the figure 1, if there is ascend in value, makers will endeavour to deliver more subsequently, and demand will fall depicting the negative demand and positively slopped supply curve. 
According to the figure 1, if a maker is delivering an ordinary good, at that point demand will be depicted by D curve and the supply by the S curve. At that point, it showcase balance will happen at the point where the demand and the supply will converge with each other. Equilibrium cost will be P and the balance in quantity will be Q. Presently, if there is substitution of the said good or service, at that point the buyers will choose the good using the opportunity cost.
Consumer demand and opportunity cost:
The opportunity cost of demand is the essential thought that gives the purchasers settling on choice in regards to the acquiring of a service or good. If there is a rise in consumption of one more unit of the said service or good, at that point the opportunity cost is lower and the buyer will use the same. Then again if the opportunity cost cost is higher, at that point the customer will want to dismiss the ordinary good or service (Leeds and Von 2016). Rising opportunity cost is one of the primary factors that decide the customer demand since ascend in the opportunity cost will improve the demand of the same and then again if there is fall in the same, at that point the demand will fall. In any case if the buyer feels that there is fall in the cost of the good or service, at that point it will upgrade the demand of the same and in the event of the fall in the value, there will be a prompt fall in the demand of the same, considering the good or service is normal in nature (Boardman et al. 2017). 
From the above discussion it can be observed that purchasing of the goods and service widely based upon the consumer demand and supply proposition. If the opportunity cost is rising, then there will be rise in the production and sale of the same and vis-à-vis allowing opportunity cost and supply and demand being a useful tool for deciding the market equilibrium,. 
Improvement of the economy under the regularly changing business sector condition the world market has turned into a strenuous activity to control by the government and if the instance of the open market like United Kingdom, then it is difficult to coordinate the same towards a productive result. Running from the full scale financial variables like profitability, investment, job creation and micro economic aspects like economic prosperity, consumer behaviour are the essential factors that need to be taken care of (Poudineh and Jamasb 2014). Keeping in mind the end goal to accomplish the general success of the economy, governments frequently use the monetary and fiscal strategies which are driven by the supply side and fiscal side arrangements from the administration.
Supply and fiscal side policies for the UK government:
Fiscal and supply side strategies are the fascinating legislative strategies that improve the execution of an economy with a specific end goal to upgrade their development opportunity (Dosi et al. 2015). With regards to the UK economy, it can be seen that the administration of the state use the same by a vast degree keeping in mind the end goal to give better development prospect to the residential economy. Under the open world situation, UK government has used the expansionary fiscal strategy till 2006 and once the Global Financial Crisis (GFC) like circumstance has taken financial jolt (Fernandez et al. 2014). Supply side approaches to upgrade the total supply in order to control the weakening business sector circumstance UK has effectively utilised the supply side policies as well. As the estimation of the financial arrangements in order to improve the monetary success of the state, UK government has upgraded the net acquiring that has enabled the administration to put more in the infrastructural advancement of the residential economy. With soar in the interest in the local economy, macroeconomic components like business, creation rate and productivity has picked up. Judging the situation of the UK economy, it can be seen that profitability of the household economy has improved by an expansive degree since 1994 (Bhattari and Trzeciakiewicz 2017). As the most recent administrative supply side arrangements it can be seen that legislature of UK has gotten Patent Box impose Incentive and fall in the corporate assessment that has enabled the organizations to utilize more measure of representatives.
Policies related to environment for economic prosperity in UK:
Policies regarding environment are another compelling instruments for the legislature to upgrade the monetary successful of the nation. Thinking about the UK situation, it can be seen that administration has taken green motion keeping in mind the end goal to get such innovations that upgrade the execution of the organizations while decreasing their carbon impression (Palley 2015). As the aggressive task to diminish the carbon impression of the local economy, Green Investment Bank has been introduced and reduction in the tax for the business who put resources into low carbon technologies has been provided. 
As per the above analysis it can be seen that the fiscal and supply side arrangements are the instruments that can improve the execution of the local economy while upgrading the profitability, execution and income for the economy. With the assistance of the fiscal approaches alongside the supply side strategies, legislature of UK has improved the livelihood of the residential economy through decrease in tax assessment rate, upgrade in the household foundation and consequently it has raised the profitability and the work level in the economy. 
Financial intermediation:
This is the move of an organisation, which serves as the link between two parties in a financial transaction such as commercial banks, mutual funds and others. With the help of such intermediation, it is possible to seek a range of benefits that include customer safety, economies of scale, liquidity, commercial banking and investment banking (Atif 2016). For example, the European Commission has considered two financial instruments for investing in ESI fund. The motive was to create easy funding access for new businesses and those promoting projects for urban development. In order to obtain public and private financing sources, loans, equities and guarantees were used, as reinvestments could be made over various cycles in contrast to grant receipts. The overall estimation made by the European Commission in terms of public and private resource investment stood at $16.50 million for small and medium organisations.
Financial instruments:
The assets that are possible to be traded in the public market are termed as financial instruments. These instruments could be cash, contractual liability of delivering or receiving cash or evidence of organisational ownership. There are two types of financial instruments, which ate cash instruments as well as derivative instruments (Collier 2015). It is possible to make easy transfers of the cash instruments such as deposits and loans that the borrowers and lenders agree and their values are ascertained by the market. The derivative instruments are reliant on the underlying elements such as assets, interest rates and security indices. For example, in order to obtain funding, an entity issues equity shares in the market. The entity having share subscription has a financial asset, which is considered as investment. On the contrary, the entity is required to account for equity investment, which is considered as equity capital (Fields 2016).
Risk and return:
The entity investing in any project expects to make favourable return on investment in future. However, there is some sort of uncertainty associated with such return on investment, which is termed as project risk (Foley 2018). On the other hand, expected return is the future return, which could not be estimated and it is the percentage that an entity expects to earn from its investment. The following table has been represented to present capital risks for debt scenario as well as equity scenario. 
For debt scenario, security of debt has amounted to $1,500,000 out of which $300,000 has been repaid in the year along with raising equity amount of $500,000 and another $2,000,000 has been obtained as equity. In case of equity scenario, the return on equity has been 24.74%, while for debt scenario; the return on equity has been 14.21%. However, it has been observed that for both debt scenario and equity difference, almost no difference is found for return on assets.  
Five types of ratios are computed for Oxfam GB, which is represented in the forms of tables as follows: 
From the above table, it is inherent that the quick ratio of Oxfam GB has declined from 4.24 in 2015 to 3.58 in 2016; however, it is well the above ideal standard of 1. This implies that the organisation is keeping adequate amount of idle cash, which is not reinvested in daily business operations or future expansion plan of the organisation (Gitman, Juchau and Flanagan 2015). 
The above table makes it evident that Oxfam GB has failed to increase its return on investment in 2016 due to the decline in net income. This is because the organisation had to incur huge amount of expenses in the year leading to net loss. Thus, in terms of market value, Oxfam GB is not in a favourable market position (Lev and Gu 2016). 
From the above table, it is inherent that the total asset turnover ratio of Oxfam GB has increased from 2.49 in 2015 to 2.72 in 2016. This is because of the slight increase in donations received, while it has to dispose certain portion of its assets, due to which it has managed to improve its asset management (Loughran and McDonald 2016). 
According to the above table, it could be stated that the debt ratio of the organisation has fallen from 52.05% in 2015 to 45.78% in 2016, which implies that it has reduced its focus on debt funding and thus, the capital structure is not highly leveraged. 
In terms of profitability, Oxfam GB has incurred significant loss in 2016 due to the rise in total costs and expenses despite increase in total revenue. As a result, the net margin of the organisation has been negative in the year and it is struggling to maintain its business operations in the operating market.   
The above table makes it evident that Project A has higher NPV of $34,266 in contrast to that of Project B of $10,824. With the help of this method, it is possible to analyse the feasibility of a project or investment and therefore, the management of an organisation could decide whether to accept or reject the project (Gippel, Smith and Zhu 2015). Hence, an organisation always desires for greater and positive NPV. For this particular project, even though both the projects have positive NPV, it is higher for Project A. Hence, it is recommended to the management of the organisation to choose that project so that its overall return on investment could be maximised.
Atif, M., 2016. CEO compensation and firm’s cash holding: A pitch. Accounting and Management Information Systems, 15(3), p.605.
Bhattarai, K. and Trzeciakiewicz, D., 2017. Macroeconomic impacts of fiscal policy shocks in the UK: A DSGE analysis. Economic Modelling, 61, pp.321-338.
Boardman, A.E., Greenberg, D.H., Vining, A.R. and Weimer, D.L., 2017. Cost-benefit analysis: concepts and practice. Cambridge University Press.
Coleman, L., 2016. Building Investment Theory Using the Structure-Conduct-Performance (SCP) Paradigm. In Applied Investment Theory (pp. 75-81). Palgrave Macmillan, Cham.
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.
Dosi, G., Fagiolo, G., Napoletano, M., Roventini, A. and Treibich, T., 2015. Fiscal and monetary policies in complex evolving economies. Journal of Economic Dynamics and Control, 52, pp.166-189.
Fan, L.I., Boyang, Y.U., Cao, R., Cao, Y. and Hong, L., 2017. Analysis on Supply-side Structural Reform Strategy of Drug Distribution Based on Structure-conduct-per-formance Analysis Paradigm. China Pharmacy, 28(10), pp.1297-1301.
Fernández-Villaverde, J., Guerrón-Quintana, P. and Rubio-Ramírez, J.F., 2014. Supply-side policies and the zero lower bound. IMF Economic Review, 62(2), pp.248-260.
Fields, E., 2016. The essentials of finance and accounting for nonfinancial managers. Amacom.
Foley, J., 2018. We really need to talk about owner-managers and financial awareness!. Small Enterprise Research, 25(1), pp.90-98.
Gippel, J., Smith, T. and Zhu, Y., 2015. Endogeneity in accounting and finance research: natural experiments as a state?of?the?art solution. Abacus, 51(2), pp.143-168.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU.
Hibino, S., Noguchi, K. and Plenert, G., 2017. Toyota’s Global Marketing Strategy: Innovation through Breakthrough Thinking and Kaizen. Productivity Press.
Kumar, D., 2016. Enterprise growth strategy: vision, planning and execution. Routledge.
Leeds, M.A. and Von Allmen, P., 2016. The Economics of Sports: International Edition. Routledge.
Lelissa, T.B. and Kuhil, A.M., 2018. The Structure Conduct Performance Model and Competing Hypothesis-A Review of Literature. Structure, 9(1).
Lev, B. and Gu, F., 2016. The end of accounting and the path forward for investors and managers. John Wiley & Sons.
Loughran, T. and McDonald, B., 2016. Textual analysis in accounting and finance: A survey. Journal of Accounting Research, 54(4), pp.1187-1230.
Palley, T.I., 2015. Money, fiscal policy, and interest rates: A critique of Modern Monetary Theory. Review of Political Economy, 27(1), pp.1-23.
Poudineh, R. and Jamasb, T., 2014. Distributed generation, storage, demand response and energy efficiency as alternatives to grid capacity enhancement. Energy Policy, 67, pp.222-231.
Ralston, P.M., Blackhurst, J., Cantor, D.E. and Crum, M.R., 2015. A structure–conduct–performance perspective of how strategic supply chain integration affects firm performance. Journal of Supply Chain Management, 51(2), pp.47-64.

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