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Essay / Research Paper Abstract
This 3 page paper is based on a case study provided by the student. The paper answers a set of questions concerning the way business economics is useful to the firm. The paper looks at how interest rates impact on decision within the firm and impact on operating costs, the impact on sales and demand and the importance of other monetary influences. The bibliography cites 2 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEbigdrive2.rtf
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that will be impacted by interest rates. The way that investment is determined will be impacted by interest rates, this may be more attractive when interest are low, especially if
there is a need for funds to be borrowed, as the cost associated with the borrowing will take up less expense. Expansion during a time of lower interest rates may
also be attractive to Big Drive Auto as during times when there are lower interest rate there is a higher level of disposable income retail outlets are likely to see
an increase in demand which will increase revenues for most firms (Bayes, 2008). Expanding at this time will leverage the macroeconomic conditions in order to potentially increase revenues. This will
also impact on the way management at Big Drive Auto choose inventory types and levels, where there is increased disposable income more may be sold more expensive items may be
sold, such as car parts that ate from the original manufacturer likewise where there is likely to be less demand for costly items and more demand for budget items when
disposable income decreases, such as generic non-brand parts. Pricing decision may also need to be made, for goods where a decrease in price will increase demand and revenue there may
be some benefit to cutting prices fr Big Drive Auto. 2. Identify how interest rates affect the cost of operating the business Big Drive Auto has a number of
operating costs; these will include the repayment of debt. Debt will be seen in long and short term arrangements. In the long term, arrangements higher interest rates will mean higher
repayments for Big Drive Auto, which will reduce the net profit level. On short term borrowing where interest is not payable, such as credit terms, suppliers to Big Drive Auto
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