Using economic analysis for a top-down analysis

"A rising tide lifts all boats".

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.

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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