30-11-2012, 01:31 PM
DATA ANALYSIS TOOLS
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Factors that are considered for the Economic Analysis are:
GDP
Inflation rate
Interest rate
Gross Domestic Product (GDP):
The monetary value of all the finished goods and services produced within a country’s borders in a specific time period, through GDP is usually calculated on an annual basis. It includes all o f private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
GDP is commonly used as an indicator of the economic health of a country, as well as to gauge a country’s standard of living. Critics of using GDP as an economic measure say the statistic does not take into account the underground economy – transactions that, for whatever reason, are not reported to the government. GDP serves as a measure of a nation’s productivity, which is unrelated.
Inflation rate:
The rate at which the general level of prices for goods and services is rising and subsequently, purchasing power is falling. Central Banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum. Price inflation can also be seen in a slightly different form, where the price of a good is the same year over year, but the amount of the good received gradually decreases.
Interest rate:
Interest is a fee paid on borrowed assets. It is the price paid for the use of borrowed money, or money earned by deposited funds. Assets that are sometimes borrowed with interest include money, shares, consumer goods through hire purchase, major assets such as aircraft, and even factories in finance lease arrangements. The interest is calculated upon the value of the assets in the same manner as upon money.
Factors that are considered for Industry Analysis:
SWOT Analysis
Industry P/E ratio
SWOT Analysis:
It is a tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, straightforward model that assesses what an organization can and cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats). Once this is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve desired results.
Industry P/E ratio:
Industrial P/E ratio is an important indicator that is used to identify the position of the company shares. It is calculated by using the total industrial price earning ratio divided by the total number of companies. In general, the high price earning ration suggests that investors are expecting higher earnings growth in the future compared to companies with a lower price earning ratio. However, the price earning ratio does not tell us the whole story by itself. It’s usually more useful to compare the price earning ratios of one company to other companies in the same industry, to the market in general or against the company’s own historical P/E.