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Unit 13/14 Financial and Economics Assignment


Economy is the macro economic term which is assessed by an economists in order to know the actual conditions in an effective manner. Any country's economy is totally depends upon the performance of organisations which carry their business operations effectively. However, this can be said that the organisation needs to carry out their operations in an effective manner. Today's world full of competition which totally relied upon the performance in an effective manner. Here, capital investment appraisal techniques are used under this report.



Market structure is the one which refers to the entire market the where the company is engaged their operation. Basically, this can be said that in general, the market consist to the characteristics of the market either firm or competitive, which elaborates the nature of competition and pricing policies which are followed in the market (Smit and Watkins, 2012). Henceforth, market structure is said to be the one which producing an identical goods and services in the market and whose structure which is identified on relying the competition prevailing in that market.

Market means to the place where sellers and buyers which satiate the selling and buying of goods and services. Various kinds of market structures are defined hereunder:

Monopolistic Competition: As per Monopolistic Competition, there is a huge number of organisations which render differentiated products which close substitutes for each other. On the other hand, Higher sellers the products which are same, but not identical and compete along with each other on other factors besides price.

Product Differentiation: It is the key features of organisation which operates under monopolistic competition, which manufacturing goods that are not identical but on the other hand.

Large Number of Firms: Higher number of organisations operates as per the monopolistic competition, and there is a intense market competition between the existing operations.

Free entry and exit: with the strong competition among the firms, the organisation is incurring loss which could move out of the industry during any time it wants. Same, the new firms could enter into the industry freely, provided this emerge with the unique feature and diverse kinds of products to out-stand in the unique feature and diverse variety of goods to out-stand in the market and meet the competition already existing in the industry. Conversely, by enhancement in the product price, this would lose its customers to others.

Perfect Competition: This is market structure where vast buyers and sellers are existing, and entire are committed in purchasing and selling of the similar products at a single price prevailing in the market. In other words, perfect competition likewise to as a higher competition, exists at the time where there is no direct competition between the rivals and all sell determining the similar goods during the single price.

Oligopoly Market: This is characterised by the few sellers, selling similar or differentiated products. On the other hand, Oligopoly market structure lies between the monopoly and the monopolistic competition, where few of the sellers reflects the market and have strong control over the price of the goods.

Monopoly Market: This is the market structure which reflected by the single seller, selling an unique good with the restriction for a new organisation to enter the market. Commonly, monopoly is a kind of market where the seller is only one which offers the particular commodity for which there are no close substitutes.

Small and medium enterprises: Small and medium enterprises are the one which ultimately helps the economy for boosting their GDP. As this can be said that there are major contribution comes from this particular way. SMEs' are the crucial tool as on average, they contains over 95% of the organisation and this also employed 65%-70% of the total labour force. Further, SMEs are driver of the economic development and innovation. In addition to this, SMEs are the driver of economic growth and innovation which ultimately helps the organisation in order to grow the business in an effective manner (Current Account, 2018). In UK economy, SMEs plays a vast role for contributing the annual return in an effective manner. In UK local market, there are various small shops which sold their products at a cheaper price than the branded goods just because of the locality of the product.

Multinational companies: These are various organisations which have their operations all around the globe which simply means that they have strong positions for operating the business in an effective manner. However, this can be said that multinational organisations made their operations in an effective manner. Multinational companies contribute handsome percentage of amount for growing of the business. However, this can be said that the organisation needs to make certain tools which can be used by the organisation in order enhance the economy. In UK, various stores are opened by the multinational companies which main aim is to grow the business adequately.

Growth Strategy: A company substantially higher the scope of one or more of its business in terms of their respective customer group, customer functions and alternative tools in order to enhance its entire performance.

Kinds of Growth Strategies:

  • Internal Growth Strategies: These are the strategies which are related to Designing and Developing new products/ services, incorporating on the current products for the new opportunities, enhancing sales of the product or services via an efficient market reach, enhancing current product lines and service offerings, coming out for a new markets, and enhancing into foreign markets.
  • External Growth Strategies: There are certain growth strategies which can be used by the organisation for gaining the sustainability (Gustman, Steinmeier and Tabatabai, 2012). Joint venture, strategic alliances, merger and acquisitions and others. There main aim is to optimise the profits for the UK High street store.


Concept of demand and supply

One of the important concept of economics on which whole market is depends. In the present report this concept is used to understand about the role of demand and supply in UK housing market.

Demand is important phenomena which provides information about desire of buyers to buy the house and homes in UK market. There is huge relation between price and quantity demanded which understood as demand relationship. On the other hand, supply refers to capacity of market to offer households and land to potential buyers. There is huge relation between the both concepts of demand and supply.

Law of demand

The provisions of this law said, if all the factors are remain same and equal, then how the prices are rise, less people are interested to buy goods. It means if the prices are high then less amount of quantity is demanded by buyer in return. For ex., UK market is well established and the prices of houses and land are increasing continuously which impacts upon the demand raised by the potential buyers in UK market. This will also has impact upon the area demanded by buyers.

Law of supply

This law of supply has adverse provision as compared to the law of demand that the reason supply relationship shows an upward slope. This includes the provision about higher the prices motivates the seller to sell the quantities in more number. It provides the opportunity to earn large n umber of profits. For ex., at present the prices are on boom in UK market which motivates the seller to sell high number of households.

Monetary policy of the Bank of England for UK housing Market

It is the tool which is used by bank to change interest rates and takes other measures which helps to bring positive changes in market.

Interest rates: Change in interest rates have huge impact on other factors also like loan and saving interest rates. Changes in such interest rates has direct influence upon demand and prices. In present scenario of UK, interest rates are higher which increases the cost of mortgages and has adverse impact upon the demand of houses.


Current asset management:

Analysis of current assets includes debtors, stock etc. is of large significance and is directly interrelated with liquidity position of a business concern. Current asset management includes administration of cash, accounts receivable, cash equivalents and prepaid expenses. It is a process of increasing assets of firm to administer best returns to share holders. There are wide range of assets that business have which includes liquid and fixed assets. Managers apply this concept in taking various decisions. It allows them to keep track of their assets which assists management in ensuring better returns (Smit and Watkins, 2012). They can easily create inventory report by managing assets from several locations in effective manner which helps them in taking decisions regarding lease financiers and insurers. By application of asset management theory, money on management can be save. It allows manager to understand abilities of its assets and the way in which these can be operated in more effective manner so as to bring efficiency in operations. Proper management of assets can assists in optimizing operations of company including resource use, planning and execution of management programme. Application of asset management system helps the managers in monitoring assets as well as its recovery process. It assists them in taking decisions regarding attainment of better returns from investments.

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Leverage refers to borrowing of funds or debt to finance the purchase of equipment, inventory & other assets of company. Using leverage or debt increase the risk of bankruptcy of firm. It also increases returns specifically on equity. It includes 3 types of leverages:

Operating leverage: It defined as the percentage of fixed costs that firm has. In other words, it is the ratio of fixed to variable costs. For instance, in auto mobile manufacturing firms, they have many equipments that is needed to manufacture a product. When economy slows down & very less people are buying cars, these firms still have to pay some fixed costs like depreciation on equipment, overhead on plants & other fixed costs that are associated with a capital intensive company (Lusardi, 2012).

Financial leverage: It is defined as the amount of debt that have in capital structure of firm. This leverage refers to right side of balance sheet. It refers the way in which operations of company will be financed. Application of this concept assists managers in taking decisions regarding financing. It can helps in enhancing return on earnings and equity per share.

Combined or total leverage: It is total amount of risk that is facing by a business firm. It is the amount of leverage that can be used by firm to magnify their returns from business. Leverage concept is used by managers in development of capital structure and in break-even analysis of the company.


Macroeconomics is a breach of economics that would concentrate on the diverse aspects of the organisation and how they are connected to each other for production of wealth (Fernandes, Lynch Jr and Netemeyer, 2014). This aspects covers the performance of the nation, its behaviour and judgement which are considered to the economy of the nation. The main indicator of the macro-economics are the inflations, balance of payment, interest rate and economic growth.

Economic growth: This enhance in the percentage in country output per year is called as the rate of economic growth. This likewise means to enhance in the growth of the nation's productive potential over the period of time in relations to the GDP per capita. To reflect the value of GDP, whole goods and services are manufactured in the year which are calculated together. This emergence is compared to those last year to overview the current year positions of the nations.

Gross domestic product (GDP): UK economy has grow with 1.4% on year to year basis. In January 2015 GDP rate is 2.7 and in 2016 it is 2.1 or in 2017 it is 2. So that, it is shows continuously decline from last few years (Fonseca Mullen and et. al., 2012). The main reason behind this is a high level of immigrants as well as low employment opportunities.

Employment indicators: It is a employment rate which shows level of opportunities that are available for all candidates at market place. In UK Employment has been increase year by year. In 2002 it is 62.90%, in 2006 its 63.00%, 2010 its 61.60%, in 2014 68.40 or in the end 66.10 in year of 2015. So that, it is concluded that employment growth is very as compare to other county that create negative impact on whole economy.

Through macro economic indicators company are able manage their work with economical growth and uncertainty. Market economy of UK is uncertain, which are directly affect firm performance as well as market position. Some important indicators of economy are gross domestic product, consumer's price index, employment indicators, balance of payment, government monetary and fiscal policies or many more (Lusardi and Mitchell, 2014). Some of them which affect overall UK economy are explain as follows:

Balance of payment: It is a record of international payment which are fulfil by government. Balance mean outstanding mount that are remain to pay back by national bank of the country. It consist two types of account current as well as capital or finance. UK have current account deficit of £ 32.6 billion that was 6.9% of total GDP in the year of 2016. It is rise form last year 2015 which are £ 96.2 billion. So it is concluded that balance of payment are continuously rise with time.


a). JSM Learn financial ratios




Liquidity Ratio



Market value ratio



Asset management ratio



Debt management ratio



Profitability ratio



Form the above mentioned report, this can be said that profitability of the of the JSM learn is increasing as compare to the last year data which reflect the most effective tool for the firm viability. Overall, JSM Learn is going good if we compare data to the last year data.

b). To calculate the present value, this can be measured as:

Present value= Future Value/(1+r)^n


r means= Interest Rate

n means= Number of years


Present value= 650(1.0450^3=569.59



Project A

Project B


Present value of project A

PV OF project B













































Here, project A must be accepted as this have higher NPV than the project .


From the above mentioned report, this can be observed that the UK economy is analysed in an effective manner. By using various tools firm can use various investment appraisal techniques. Here, various macro-economic indicators are used which affect the economy in an effective manner. Inflation rate and balance of payment are used under this report. In this report, certain tools investment appraisal techniques are used under this report. Also, read how agriculture affects economics.


  • Lusardi, A. and Mitchell, O.S., 2014. The economic importance of financial literacy: Theory and evidence. Journal of economic literature, 52(1), pp.5-44.
  • Fonseca, R., Mullen, K.J., Zamarro, G. and Zissimopoulos, J., 2012. What explains the gender gap in financial literacy? The role of household decision making. Journal of Consumer Affairs, 46(1), pp.90-106.
  • Fernandes, D., Lynch Jr, J.G. and Netemeyer, R.G., 2014. Financial literacy, financial education, and downstream financial behaviors. Management Science, 60(8), pp.1861-1883.
  • Lusardi, A., 2012. Numeracy, financial literacy, and financial decision-making (No. w17821). National Bureau of Economic Research.
  • Smit, Y. and Watkins, J.A., 2012. A literature review of small and medium enterprises (SME) risk management practices in South Africa. African Journal of Business Management, 6(21), p.6324.
  • Gustman, A.L., Steinmeier, T.L. and Tabatabai, N., 2012. Financial knowledge and financial literacy at the household level. American Economic Review, 102(3), pp.309-13.
  • García, N., Grifoni, A., López, J.C. and Mejía, D., 2013. Financial education in Latin America and the Caribbean: Rationale, overview and way forward. OECD Working Papers on Finance, Insurance and Private Pensions, (33), p.1.
  • Stylidis, D. and Terzidou, M., 2014. Tourism and the economic crisis in Kavala, Greece. Annals of Tourism Research, 44, pp.210-226.
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