This course has been a great class for me, as my first class back into my
“academic adventure”. To say what macroeconomic variable financial
managers should be preparing for in the next five to ten years is difficult,
as there is so much in the ever-changing economic landscape to prepare
for. To focus on just one or a few for the purpose of this discussion I have
included some in this post. a
1. I think the single most important consideration for financial
managers in the foreseeable future will be interest rates. Interest
rates are incredibly important to businesses, and economy wide
trends. For businesses/financial managers this means increased cost
of borrowing, increased costs of supplies, changes in consumer
purchases as consumers are more hesitant to spend their money, and
increased difficulty to have cash on hand (Conerly, 2022). As the
FED continues to push up the short-term interest rate, long term
rates will rise with it, this will have a lasting impact on businesses
and the economy, extending into the next several years (Conerly,
2022). It will be extremely important for a financial manager to
understand how this change in interest rates will impact a business
in not only the short term, but also in long term business aspects.
Consumers will be apprehensive about making larger purchases,
and predicted future cash flows will be impacted, a financial
manager will need to adjust business strategy and expectations to
address this. Rising interest rates will have lasting impacts on
businesses and individuals for the foreseeable future.
2. I would be remiss if I completed this assignment without
mentioning inflation. Inflation also ties into interest rates, as interest
rates are part of the government’s way of trying to control inflation.
Inflation is something that financial managers will need to keep
their “finger on the pulse” on to strategize for the future. As
inflation rises businesses will see higher supply chain costs, and
smaller profit margins, which they will need to pass the increased
costs on to consumers (Camberato, 2022). Inflation is something
that a business must always consider, but it seems that recently
prices of important commodities have increased quickly and at
times unexpectedly. Understanding this and predicting future trends
will help financial managers and individuals stay ahead of the curve.
I think that specific topics like the Time value of money, and the cost
of capital will help me prepare for these variables. In my personal life the
time value of money section helped me better understand how interest
rates and other factors can impact the costs of borrowing money. (We
looked at interest rates and down payments in examining a hypothetical
mortgage). This information is essential for me as I am considering
purchasing my first home here soon. As interest rates continue to increase
it helped me better understand other ways (financing less, shorter loan
terms, larger down payment), that I could decrease the amount spent on
interest.
Our cost of capital section/discussion provided insight into how
various factors could impact a company’s WACC and could change how a
company decides to raise capital for its expansion. I believe these
concepts will be vital in my professional life, especially since I work in
the Mortgage industry, and changing WACC is just a fact of life in our
industry. This will help me to forecast changes in WACC as various
factors come up on the horizon.
References
Camberato, J. (2022, October 12). Council post: The impact of inflation
on small businesses and how to manage it. Forbes. Retrieved January
18, 2023, from
https://www.forbes.com/sites/forbesfinancecouncil/2022/05/25/the-
impact-of-inflation-on-small-businesses-and-how-to-manage-
it/?sh=3410fa72ae41
Conerly, B. (2022, November 8). What rising interest rates mean for
business. Forbes. Retrieved January 18, 2023, from
https://www.forbes.com/sites/billconerly/2022/01/27/what-rising-
interest-rates-mean-for-business/?sh=6d04df5c23a1
