I need to reply to one of my classmates discussion that I have attached. I need 3 different paragraphs, each paragraph in about 250 words. APA format and refernces are important
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According to Gitman & J.Zutter (2015) various macroeconomic factors that influence the business
Economic Growth: Economic activities refer to the level of buying and selling activities happening in
an economy over a time period. It is a highly complex activity and keeping accurate track of it is
beyond comprehension. Economic activity is not constant and can change rapidly, thereby affecting
the business. Economic activity changes could happen due to the following reasons: Changes in
income levels Future prospects of individuals (Gitman & J.Zutter, 2015).
Inflation: With the increase in Inflation there will be an increase in the level of prices of products and
services over a specific period of time. As a result, the firms will have to incur higher costs of
operations. This will be also due to the increase in wages of the employees.
Interest Rates: Interest rates are the charges levied by the banks for lending a loan. Increase in
Interest rates will directly influence the business as businesses borrow money from the banks from
time to time. Increase in interest rates will lead to higher interest expense: Businesses will have to
incur higher costs to repay the loan.
I used to work for a financial institution which entirely runs businesses on the home mortgage
business. When great recession occurred 2007-08 since the people buying homes are less, they
almost ran out of business. This is because they didnâ??t consider that the above discussed factors are
important and thus they faced almost bankruptcy.
One of the topics that interested me in chapter 7 and 8 is Debt and Equity. Debt includes all
borrowing incurred by a firm, including bonds, and is repaid according to a fixed schedule of
Equity consists of funds provided by the firmâ??s owners (investors or stockholders) that are
repaid subject to the firmâ??s performance.
Unlike creditors, holders of equity (stockholders) are owners of the firm. Stockholders
generally have voting rights that permit them to select the firmâ??s directors and vote on special
issues (Mohamed, 2013).
In contrast, debtholders do not receive voting privileges but instead rely on the firmâ??s
contractual obligations to them to be their voice. Equityholdersâ?? claims on income and assets
are secondary to the claims of creditors. Their claims on income cannot be paid until the
claims of all creditors, including both interest and scheduled principal payments, have been
Because equity holders are the last to receive distributions, they expect greater returns to
compensate them for the additional risk they bear (Mohamed, 2013).
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