Question

Identify two economy wide factors and two industry factors that could impact on the financial performance and position of two companies and two specific factors which could impact on the financial performance and position of Sims Metal Management Lmited and BlueScope Steel Limited, respectively. (In total, you should identify and analyze, at least, eight factors.)

Answer 1

Please see the below table to get brief idea of what we are discussing.

Two Economic wide factors	Two Industry Factors	Financial Performance of Two company	Two specific Factors
Prices and Interest rate	Competition	Fiancial Ratio	Return on Asset
Demand and Supply	Industry Growth rate	3 Basic Principles : Investment, Financial and Dividend decision	Return on Investment

Prices, affected by the rate of inflation, naturally impact consumer spending on goods significantly. This is one reason the producer price index (PPI) and the consumer price index (CPI) are considered leading economic indicators. Higher inflation rates erode purchasing power, making it less likely that consumers have excess income to spend after covering basic expenses such as food and housing. Higher price tags on consumer goods also reduce spending.

Interest rates can impact the level of spending on consumer goods substantially. Many higher-end consumer goods, such as automobiles or jewelry, are often purchased by consumers on credit. Higher interest rates make such purchases substantially more expensive and therefore deter these expenditures. Higher interest rates generally mean tighter credit as well, making it more difficult for consumers to obtain the necessary financing for major purchases such as new cars. Consumers often postpone purchasing luxury items until more favorable credit terms are available.

Demand and Supply this is key economic indicator before doing business if the product going to select having high demand and less supply it's favourable situvation and vice versa

Competition need to know type of merket it is whether it is monopoly, Oligopoy, monopolistic etc.

Industry Growth this is one of the key indicator before start working on the industry

Financial Ratio this indicates firms specific performance

3 Basic Principles means investment decision, (which project need to choose that should give more than expected return, Financial decision (mix of debt and equity), Dividend decision (if you can't find better way to invest give that money to shareholders let them find better place to invest

Return on asset it specifies firm revenue generation ability from their asset

Return on Investment indicates how much retun received from investment