“Explain the influence of global markets on financial management of businesses”

Resource Description

Explain the influence of global markets on financial management of businesses

Economic outlook-Expense Minimisation
Economic outlook refers specifically to the projected changes to the level of economic growth. In a positive economic outlook the effect is increased jobs, more money to spend, greater demand for products and businesses do well. However in a negative economic outlook the effect is the opposite.  The impact of a negative economic outlook is shown through the global financial crisis. This resulted in many individuals losing their jobs thus providing them with less disposable income which has a detrimental flow on effect towards businesses. In 2009 the GFC caused rapid revenue declines creating challenges for qantas. These challenges include availability of funds and interest rates. Qantas responded by cutting flying capacity, deferring and cancelling orders for new planes, restructuring and replacing Jetstar with some routes ultimately minimising qantas’s Fixed and variable costs. Clearly economic outlook has caused this business to result in utilising the cost control strategy decreasing fixed and variable costs in order to compensate for the losses. In effect this allowed Qantas to survive the GFC and ultimately cut costs. Evidently, the negative economic outlook caused by the GFC has resulted in the use of expense minimisation to compensate for such losses.

Interest Rates
Interest rates refers to the cost of borrowing. Businesses are now able to borrow funds overseas as interest rates can be lower than the home country because of global interest rate fluctuations. Since businesses are able to access global funds, this has provided the opportunity for greater financing. Recently qantas has taken advantage of low global interest rates resulting in saving millions of dollars in interest repayments.