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- 6 Marks
Question
The quarterly report of the treasury unit of Buruwa Limited contains a paragraph on government policy targets and progress towards achievement of the targets. The Technical Director has expressed disagreement about the time spent discussing these policies as wasteful because the policies have no relevance to the business activities of the confectionery company.
Required:
As Head of Finance, you have been tasked to discuss SIX (6) points on government revenue mobilization policies to agree or disagree with the Technical Director’s position. (6 marks)
Answer
- Impact on Interest Rates: Government policies can influence interest rates, affecting borrowing costs for businesses. Higher rates might reduce investment and expansion opportunities for companies.
- Taxation Policies: Government tax policies directly impact business profitability. Changes in tax rates or structures can alter a company’s financial performance and strategic decisions.
- Public Spending: Increased government spending can lead to greater demand for goods and services, benefiting businesses. Conversely, austerity measures might reduce overall demand.
- Regulatory Compliance Costs: Policies that require businesses to comply with new regulations can increase operational costs, affecting profitability.
- Foreign Exchange Policies: Government control over exchange rates can impact the cost of imports and the competitiveness of exports, directly affecting businesses engaged in international trade.
- Monetary Policy: The central bank’s monetary policies, including inflation control and money supply management, can influence consumer spending and overall economic stability, impacting business operations.
- Topic: Financial markets
- Series: NOV 2015
- Uploader: Joseph