UNDERSTANDING COMPANY DECLINES
Oftentimes, the content of news business sections are about companies’ gradual downfalls. At one point a certain firm is enjoying its soaring figures, then next thing you know, the same company is struggling to save their business. It seems like the littlest of shifts and the smallest of mistakes can either make or break a company. As a viewer who may or may not be interested in finding out what are the major causes of these downturns, it would still be beneficial for individuals to have a background on what factors causes businesses to fall--who knows, maybe someday they’ll be needing these facts as well.
In 2016, the weakening of corporate earnings which started the previous year is said to likely prevail. Analysts forecast revealed that this year could lead to an even slower growth for companies compared to the 3.3 percent it was able to climb in 2015.
One the elements that influence the drop of company profit is strengthened dollar. A stronger dollar is equivalent to lower revenue, especially given the tight competition in global pricing. Another looming problem for companies is the possible hike in interest rates by FED in the 2nd half of the year, which will result to an increase in international investment that would strengthen the dollar further.
Another factor is a slump in the goods and services sector. The goods category has always been a weak portion of the economy, specifically the durable goods sector. Research have shown companies that produces goods have only improved by a meager 0.4% in Q1, and those who offer services have only grown by 2.6%.
Lastly, the widespread dive of energy costs especially in oil reportedly accounts for the remarkable flop in companies. Worse, no signs of rebound are seen for the next half of the 2016. The series of losses caused by the deterioration in oil prices have also affected other sectors as well.
All in all, company income continues to go down, with no visible glimmer of recovery as of present. Energy costs, although indicated the tiniest recovery, is said to remain flat plus probability that the Federal Reserve will raise interest rates
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