Identify the role of general economic conditions in a firm's profitability.
A)When interest rates are low, many firms can afford to invest in new assets.
B)When an economy slows down, industry growth rates increase and rivalry decreases.
C)Inflation tends to increase overall economic growth, decreasing rivalry and the threat of substitutes.
D)During deflation, many industries experience increases in price competition as a means of gaining market share.

Question

Quizplus · Accepted Answer

General economic conditions, such as interest rates, can impact a firm's profitability by affecting its ability to invest in new assets. When interest rates are low, firms may have more financial flexibility to invest in new projects, which can lead to increased profits. Conversely, high interest rates may make it more difficult and expensive for firms to borrow money to invest in growth opportunities.

Identify the Role of General Economic Conditions in a Firm's