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macroeconomic indicators that you feel have the greatest impact
It should be noted that there are many macroeconomic indicators that are used by economists to research heath of countrys economic system. The main macroeconomic indicators include GDP, GDP per capita, an unemployment rate, inflation, etc. Each indicator considers the current state of a certain area of an economic system. In order to distinguish the main macroeconomic indicators that affect the Eaton Corporations efficiency, the dynamics of these indicators should be analyzed.
Table 1: Indicators of U.S. Economic Development
|
|
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
|
GDP growth (annual %) |
|||||||||
|
USA |
3,35 |
2,67 |
1,79 |
-0,29 |
-2,80 |
2,51 |
1,85 |
2,78 |
1,88 |
|
Inflation, consumer prices (annual %) |
|||||||||
|
USA |
3,39 |
3,23 |
2,85 |
3,84 |
-0,36 |
1,64 |
3,16 |
2,07 |
1,46 |
|
Unemployment, total (% of total labor force) (modeled ILO estimate) |
|||||||||
|
USA |
5,20 |
4,70 |
4,70 |
5,90 |
9,30 |
9,70 |
9,00 |
8,10 |
|
|
GDP per capita (current US$) |
|||||||||
|
USA |
44314 |
46444 |
48070 |
48407 |
46999 |
48358 |
49855 |
51755 |
53143 |
|
GDP (current trillion US$) |
|||||||||
|
USA |
13,10 |
13,86 |
14,48 |
14,72 |
14,42 |
14,96 |
15,53 |
16,24 |
16,80 |
Analyzing the data provided in Table 1, it can be concluded that the current state of the USA economy is not the best since GDP was declined by 0.29% in 2008 and by 2.8% in 2009. Additionally, the US GDP per capita was also reduced from $48,070 in 2007 to $46,999 in 2009. It means that the global financial crisis had a negative impact on the American economy. In fact, the average rates of American GDP growth were declined from 2.6% before the crisis to 2.25% after it. It means that the American economy has not reached the rates of economic growth that were observed before the global financial crisis. Additionally, such important indicator as unemployment was degraded in the United States since unemployment increased from 4% in 2000 to 9.6% in 2010.
According to the data provided in Table 1, the tempos of inflation in the United States during the financial global crisis were decreased from 3.8% in 2008 to -0.35% in 2009. It means that the inflation in the USA was caused by demand factors, not factors of supply. The fact also approves that previously high rates of economic growth were combined with higher rates of inflation while in the stage of recession consumer prices were reduced. However, since the 50s of the twentieth century, consumer prices only increase. It means that such a phenomenon as deflation occurs quite rarely.
In addition, the unemployment rate was increased from 4.7% in 2007 to 5.9% in 2008 and 9.3% in 2009. Such fact just proves that economic recession leads to the higher rates of unemployment. As it is known, economists distinguish three kinds of unemployment such as structural, frictional, and cyclical. Frictional unemployment is related to the constant moving of a labor force between regions and kinds of jobs, as well as certain stages of peoples life. Economists consider the fictional unemployment as inevitable and wishful to some extent since many workers will be able to find a more effective, highly paid job. Structural unemployment occurs when the supply of a labor force is not matched with its demand. This situation usually occurs due to the changes in the structure of consumers demand. Consequently, it leads to the changes in the labor force demand. Therefore, the structure of a labor force does not match with the structure of jobs. Structural unemployment is also considered as inevitable. On the other hand, cyclical unemployment is related to downturns of business activity. As it is known, in the case of recession, the demand on goods and services is reduced and, that is why, the unemployment rate is increased. Therefore, the structural and frictional unemployment are inevitable, i.e. such types of unemployment cannot be avoided in any economic system while cyclical unemployment is equal to zero at the stage of economic ascension. That is why the full employment is reached when the cyclical unemployment is equal to zero.
Table 2: Indicators of Eaton Corporations Activity
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|
Period Ending |
Dec 31, 2013 |
Dec 31, 2012 |
Dec 31, 2011 |
|
Total Revenue |
22,046,000 |
16,311,000 |
16,049,000 |
|
Cost of Revenue |
15,369,000 |
11,448,000 |
11,261,000 |
|
Gross Profit |
6,677,000 |
4,863,000 |
4,788,000 |
|
Net Income |
1,861,000 |
1,217,000 |
1,350,000 |
As it is seen from the data provided in Table 2, the Eaton Corporations total sales increased from $16.05 billion in 2011 to $22.046 billion in 2013. Therefore, it means that the growth of American economy led to increasing the companys total sales. However, the entire range of provided in table 2 indicators are absolute. In order to better evaluation the Eaton Corporations financial state, the financial ratios should be used.
Table 3: Eaton Corporations Financial Ratios
|
Period Ending |
2013 |
2012 |
2011 |
|
Return on Total Assets |
5,24% |
3,40% |
7,55% |
|
Current Ratio |
1,78 |
1,43 |
1,60 |
|
Debt-to-assets |
0,52 |
0,58 |
0,58 |
|
Accounts Receivable Turnover |
5,22 |
4,04 |
5,65 |
According to the data provided in Table 3, the companys efficiency was decreased, since its return on total assets decreased from 7.55% in 2011 to 5.24% in 2013. However, the most significant growth of American economy was observed in 2012. That is why it can be concluded that the dynamics of Eaton Corporations productivity is not strongly connected with dynamics of the US GDP growth. The companys liquidity was increased from during the analyzed three years. In addition, the Eaton Corporations solvency was also increased since its debt-to-assets ratio reduced from 0.58 in 2011 to 0.52 in 2013.
The companys financial state was improved due to recovering of American economy after the global financial crisis.
