Economic factors comprise the information that influences the value of an investment or business. When you are calculating the present and anticipated future value of an investment portfolio or a business, the economic factors are what you bear in mind. The primary economic factors are management, taxes, government policy, interest rates and labor costs.Know More
Labor costs are an economic factor that has led many companies to outsource many of their basic functions to sites outside the United States. In many countries, especially in South and Southeast Asia, American companies have established factories, call centers and other facilities to handle many of their operational functions because workers there are much cheaper to hire.
Interest rates are more a factor for investment portfolios than businesses. When interest rates are higher, many investors turn to more secure vehicles, such as certificates of deposit, but when rates go down, some investors are willing to take on more risk through investments that lack government protection.
Government policy and taxes make up another reason why businesses choose particular states and countries for incorporation. The corporate tax structure in Delaware, for example, causes many firms to set up headquarters in that state, even though the primary business may be far across the country.
Management is a factor specific to each company. Businesses with effective management are much more likely to prosper and, therefore, are a stronger investment idea.Learn more about Economics
Economic instability refers to a community or nation experiencing financial struggles due to inflation, consumer confidence issues, unemployment rates, and rising prices. Economic instability affects businesses' ability to thrive, the cost of living, and the physical, emotional and financial well-being of consumers and families.Full Answer >
Economic disequilibrium is a state where market equilibrium is unreachable due to internal or external variables. Disequilibrium can also occur when internal or external variables result in a disruption to the balance in the market. It is also a result of long-term structural imbalances or short-term changes in market variables.Full Answer >
The economic perspective focuses on how resources are distributed in an organizational setting. Philosophies that stem from the economic perspective concentrate on leveraging or manipulating those resources.Full Answer >
Economic profit is the total revenue generated by a business minus total opportunity costs. It is a more theoretical way of looking at a company's profitability that differs from the standard accounting profit reflected on the company's income statement, which simply subtracts the cost of producing goods and services from total revenue.Full Answer >