A good company may have problems when the general economy is on a decline. As a result, we need to do a macro-economic analysis to understand the factors that affect any company that we want to analyse.
A simple way to analyse can be done using the table below.
Indicators
|
Description
|
Unemployment
rate
|
The
lower the better (aim to have maximum of 4%)
|
Government surplus
|
Government deficit signals a
poor economy (use % of GDP)
|
Public
debt
|
The
public debt should not be higher than GDP (use % of GDP)
|
Debt versus reserves
|
A high public debt with low
reserves is a cause for worry
|
Trade
surplus
|
Exports
must be more than imports
|
GDP and GDP growth
|
If GDP growth is negative,
it is a concern
|
It is normal that companies do poorly when the general economy is poor. However, if the economy is doing well, and the company isn't, there is a cause for concern.
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