I believe financial managers should be preparing for inflation in the next 5 to 10
years. There has been a huge spike in inflation in today's world and this will not
be the last one. If financial managers are going through this rollercoaster at the
moment, it will help them prepare for other spikes in the next 5 or 10 years.
The time value of money concept will help me prepare for the impact of
inflation. The time value of money has helped me understand that a dollar
today is worth more than it will ever be and that investing is important. The
importance of compounding was also cleared up for me in this course. If I save
and invest now, it will personally place me in a better position later in life when
inflation spikes again in 5 or 10 years. Let me start by saying that this class has
been extremely challenging for me. I have always worked for very small
companies and have no experience with the stock market, bonds and
investments. All of this was a huge learning curve.
As far at the next 5 to 10 years, managers need to be honed in our market
conditions and how they effect their companies investments and liabilities. For
example the owners of the company I work for were shocked at the renewal
rate of our line of credit because we've been sitting on a low rate for years. I am
now able to provide them with insite as to whether or not it would be beneficial
to use the line of credit versus using available cash by preparing detail on the
impact of the rate and uncertainty of the rate potentially becoming higher.
Inflation is another area of concern. As prices rise, managers need to keep a
close eye on their bottom line in order to maintain a level of profitablity that
allows the company to a move forward.
From a personal perspective, having a better understanding of the stock market
may assist me in the future as I prepare for retirement. I currently do not have
any plans to change employers yet now feel more confident that if I went to a
more corporate environment, I would feel comfortable in a financial role that
had more assets and liabilities than the company I presently work for.
In the next 5-10 years, the macroeconomic variables that corporate financial
managers should prepare for are inflation and unemployment. Currently, the
inflation rate is on an increasing trend. According to the Phillips Curve, it
hypothesizes that there is a correlation between inflation and unemployment.
Tretina (2021) states that when inflation is high, unemployment is low or vice
versa. The inflation rate is expected to decrease in the next 5-10 years. Inflation
and unemployment play a significant part in a business. Inflation causes
business to increase prices on their products to be able to keep up with the
rising prices and labor expenses. Unemployment rates are low, so that means
that businesses are at fully staffed rates.
Overall, inflation has huge part in everyones life. In some cases, business do not
provide an adequate increase in wages to employees for them to be able to
keep up with inflation rates. I would recommend for everyone to try and budget
as much as they can.
Inflation And Unemployment – Forbes Advisor. (n.d.). Www.forbes.com.
https://www.forbes.com/advisor/investing/inflation-and-
unemployment/#:~:text=The%20Phillips%20Curve%20hypothesizes%20that
