FINANCIAL ANALYSIS

Financial Analysis



Introduction

Economic AnalysisMonetary Policy

United States of America is following expansionary monetary policy because interest rate is reduced which increased interest sensitivity, which includes physical investment i.e. (plant and equipment) by firms, residual housing construction and consumer durable goods, automobile and appliance by housing. It encourages exchange rate depreciation which causes export to rise and imports to fall. Despite of the fact that USA is following expansionary policy over year's inflation remained under the control.

Fiscal Policy:

USA is going to face fiscal cliff. In order to avoid it US policy makers have decided to raise the tax rate on individual and cooperate sectors which ultimately decreases the net income of cooperate sectors and disposable income of an individual.

GDP

Gross domestic product of United States declined in the 0.1% in the fourth quarter of 2012 after an increase in 3.1%.For the full year 2012 the gross domestic product was increased to 2.2%.

Unemployment

Unemployment rate of United States of America is 7.90% compared to 8.30% in year 2012. Unemployment rate in United States is higher than the long term average of 5.81%

Inflation

The inflation rate in United States of America was 1.70 in fourth quarter of year 2012.

Foreign trade

Gross domestic product for goods and services deficit went down from 3.7 %in year 2011 to 3.4 % in year 2012. The nation's international trade deficit in goods and services decreased from $ 48.6 billion to $38.5 billion. Exports increased from $92.6 billion in year 2011 to 2195.9 billion in year 2012. Imports increased from $73.6 billion in year 2011 to 2736.3 billion in year 2012. (Griliches, Z.1998).

Foreign Trade

Since Economies in foreign countries are down, so American companies cannot sell as many goods overseas as they used to which causes drop in revenue which ultimately slows up as drop in the stock market.

World Events

The terrorist activities like Sept. 11, 2011 has affected markets directly and left a deep impression in the minds of investors to trade less and to focus on bonds and stocks with less risk. United States of America is currently paying more attention towards the defense contract and can increase the price of stocks for companies that supply armed equipments that will ultimately increase the price of the stocks of military armed supply companies.

Hype

Current security markets of United States are affected by hype about the companies or the release of new products and services. Since tax rate are expected to increase in few months, company's net income will decrease and hence this will affect the movement of market because companies will issue shares at higher price and investor because of higher price will not invest.

Growth

Industry of Information technology in United States of America is at the growth stage because there are more market rivals like Microsoft, Apple and many more. There is industry- wide acceptance of the product, more new entrants in the market. The life cycle curve is very steep, which indicates rapid growth. Companies tend to spread out geographically. The industry is experiencing more products standardization and ...