For the final project, you will respond to the following scenario:
Imagine you are the chief financial officer of the Fortune 500 company y ou chose in Module One . Given
the positive macroeconomic trends, including improvements in labor market conditions, the Federal Reserve recently increased the federal funds rate. With the continued improvement in economic outlook, the Federal Reserve is poised to increase the federal funds rate again in the near future. The Fed believes
that with the gradual increase in monetary policy, the economic activities and labor market will strengthen and inflation will remain consistent.
As the CFO of your company, you must analyze and evaluate the likely impacts of the aforementioned Federal Reserve monetary policy actions to the wider economy, as well as the resulting implications for your firm. Based on your assessment, you will put forth various recommendations to the company’s board for improving their financial position while safeguarding against corporate risk.
C. Assess the potential for the macroeconomic events to pose financial risks to your firm.
i. First accurately identify the risks. For example, how might your firm be negatively impacted by fluctuations in the money supply?
Provide a specific example to illustrate each identified risk.
ii. Then measure the risks using appropriate financial tools. For example, consider calculating your firm’s debt-to-capital ratio, debt/equity ratio, interest coverage ratio and their degree of combined leverage.
