From the course: Creating Business and Industry Analysis for Financial Analysts

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Economic factors to consider in a business analysis

Economic factors to consider in a business analysis

From the course: Creating Business and Industry Analysis for Financial Analysts

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Economic factors to consider in a business analysis

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- [Lecturer] The next part of a thorough business analysis is understanding economic impact. Economic factors play a crucial role in shaping market conditions, consumer behavior, and investment opportunities, making it vital to consider them carefully. This lesson focuses on the effects of economic forces on individual businesses. In future chapters, we'll examine how these same forces can influence entire industries. How economic forces impact a business is usually correlated to how the overall industry is impacted, but their movements are not always perfectly synchronized. With that, here are the forces you need to consider in your business analysis. First, cyclicality, meaning how sensitive is a business to economic fluctuations. For example, luxury goods manufacturers will sell less in an economic downturn than essential goods producers like utilities or grocery stores. Second, export exposure. Is the business heavily reliant on exports? If so, how might changes in trade policies,…

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