Week 2 - Discussion Forum 2Guided Response Respond to at leas

Week 2 - Discussion Forum 2
Guided Response: Respond to at least two of your fellow
students’ and to your instructor’s posts in a substantive manner
and provide information or concepts that they may not have
considered. Each response should have a minimum of 100
words. Support your position by using information from the
week’s readings. You are encouraged to post your required
replies earlier in the week to promote more meaningful and
interactive discourse in this discussion forum.
On this Document there two classmates with discussion that
needs to be response. Jason Stack and Ashley Thiberville
Jason Stack
Unemployment
The term unemployment is often a word that make a
person uneasy, especially in today's COVID-19 effected
economy. However, we don't often think about what this
percentage incorporates. According to Gwartney et al. (2019),
the unemployment rate is the percentage of people of the
civilian workforce above the age of 16 that do not have a job,
are available for work, and have been actively seeking
employment within the past four weeks (pg. 8-2). Additionally,
this doesn't include those who are not actively seeking
employment such as students, household workers, disabled,
retirees, or those that stopped looking for employment.
Understanding what is included and excluded in the calculation
of the unemployment rate, we can why the unemployment rate is
such an important metric for the U.S. economy.
The unemployment rate is one of the critical metrics
economists used to measure the health of the economy.
Gwartney et al. (2019), suggest that employment and output are
closely linked, and their relationship point toward the location
of where a nation is in its business cycle. The business cycle is

a reflection of a nation's economic growths and slowdowns over
time, which reflects the real output (Gwartny et al., 2019, pg. 8-
1a). Therefore, the relationship between actual output and
unemployment can reflect the position in the cycle. For
example, figure 1 shows the unemployment rate of the United
States for 2019. The unemployment rate is trending downward,
indicating a higher percentage of the civilian workforce is
employed, the output is increasing, and economic growth is
rising. Respectively, if the opposite were to occur over the next
few months due to the COVID-19, unemployment would
increase, output would reduce, and the economy would be
leading into a slowdown period.
Figure 1 https://www.ncsl.org/research/labor-and-
employment/national-employment-monthly-update.aspx (Links
to an external site.)
With such a heavy reliance on the unemployment rate
percentage, there seems to be some question as to its accuracy.
Buss (1986) suggests that the U.S. Bureau of Labor Statistics
(BLS) uses secondary or administrative data sources, such as
tax records and employer surveys, a process requiring a great
deal of estimation, adjustment, and inference to calculate the
unemployment rate (pg. 241). An alternative method of
reporting unemployment rates offered by the BLS, such as the
U-6, includes part-time workers and marginally attached
workers for the past 12 months (Gwartney et al., 2019, pg. 8-2).
Additionally, the employment/population ratio is a reflection of
the number of employed people divided by the population (aged
16 and older). This is another variation that is less subjective
toward classifications and could offer a more accurate
estimation of employment (or unemployment) and its
representation to the business cycle.
Thanks,
Jason Stack

References
Buss, T. F. (1986). Assessing the Accuracy of Bls Local
Unemployment Rates: A Case
Study. ILR Review, 39(2), 241. https://doi-org.proxy-
library.ashford.edu/10.1177/001979398603900206
Gwartney, J. A., Stroup, R. L., Sobel, R. L., & Macpherson, D.
A. (2018). Macroeconomics:
Private and public choice (16th ed.). Retrieved from
https://www.cengage.com
National Employment Monthly Update. (n.d.). Retrieved April
15, 2020,
https://www.ncsl.org/research/labor-and-employment/national-
employment-monthly-update.aspx
Ashley Thiberville
Unemployment is calculated by dividing the number
of people unemployed by the number of people in the labor
force (Gwartney, Stroup, Sobel, & Macpherson, 2018). The
labor force includes civilians aged 16 or older who are
employed or seeking employment, it does not include military
personnel, those in school, retired or disabled (Gwartney et al,
2018). The labor force is simply those over the legal age to
work and are actively seeking employment or are currently
working, the idea being that including those that are not able or
not seeking employment does not give an accurate picture of
unemployment.
The past 3 fiscal quarters of the US have seen
unemployment decreasing. Q2 2019: 3.5%, Q3 2019: 3.7% and
Q4 2019: 3.3% (U.S. Bureau of Labor and Statistics, 2020).
The unemployment rate is important in business as it is a direct
indicator of economic growth or recession (Gwartney, 2018).
The unemployment rate is directly related to the economy and
generally shows how healthy a countries economy is or if the

economy is steadily growing. The GDP and unemployment rate
generally mirror one another, if GDP is increasing, generally
jobs will increase, lowering the unemployment rate (Ostrup,
2000).
Cyclical employment is a natural ebb and flow of
unemployment rates based on demand for goods (Gwartney et
al, 2018). The unemployment rate will vary as demand for
products and services varies over time. The demand for labor
generally increases around the holidays as there is more demand
for workers to produce and sell goods to consumers.
A. (2018). Macroeconomics: Private and public choice (16th
ed.). https://www.cengage.com (Links to an external site.)
Ostrup, F. (2000-04-13). “Money and the Natural Rate of
Unemployment.” Cambridge University
Press. https://ebookcentral-proquest-com.proxy-
library.ashford.edu/lib/ashford-
ebooks/reader.action?docID=202382 (Links to an external site.)
U.S. Bureau of Labor and Statistics. (2020). Unemployment
Rate. https://data.bls.gov/pdq/SurveyOutputServlet
Guided Response: Respond to at least two of your fellow
students’ and your instructor’s posts in a substantive manner
and provide information or concepts that they may not have
considered. Each response should have a minimum of 100
words. Support your position by using information from the
week’s readings. You are encouraged to post your required
replies earlier in the week to promote more meaningful and
interactive discourse in this discussion forum.
needs to be response.Kivette Ball and Britney Graves
Kivette Ball
GDP is known as Gross Domestic Product, and it is the measure

of a country’s economic activities that is all the finished goods
and services it produces in a specified amount of time. It
usually measures all the public and private consumption's
within the country, the investments that are made in the
country, the cost of the paid-in construction, the foreign trade
balance whereby the exports are usually added, and the imports
are subtracted, government outlays and the private inventories.
All these are supposed to be done in a specified period.
However, GDP is not used to measure wealth. According to
Duffin (2020), the U.S. GDP increased by 2.1 percent from the
third quarter of 2019 to the fourth quarter of 2019. Overall, the
US GDP increased by 2.3 percent in 2019 (para. 1). This has
been the same as the second quarter and also the fourth
quarters.
GDP is very important, and that is why it is often mentioned in
the business news. It usually shed light on the size of the
country's economy and how the economy is doing either good or
poor. It an indicator of the health of a country’s economy. There
are some pros and cons of GDP. One of the pros is its
simplicity. It breaks the economy to a singular number. Thus
showing using a figure how much the economy is producing.
Also, it is an indicator of how the economy is performing. One
of the cons of GDP is that it is an unclear indicator because it
usually indicates consumption but does not differentiate
between high and low consumption. Also, it can be inaccurate,
given it takes to consider only the reported consumption. GDP
is very real, given that is what economists use to determine the
health of the economy, and it is what investors check before
they decide to invest in a country. Gwartney et al., (2018)
reveals There are two methods of calculating GDP. It can be
calculated either by summing the expenditures on the “final-
user” goods and services purchased by consumers, investors,
governments, and foreigners (net exports) or by summing the
income payments and direct cost items that accompany the
production of goods and services (Ch. 7, 7-2). To give deeper
insight, it is usually adjusted for the population and inflation.

The formula is GDP=Consumption(c) + Government spending
(G) + Investments (I) =Net exports (NX).
Duffin, E. (2020). U.S.: real GDP growth by quarter 2011-2019
| Statista. Statista.
https://www.statista.com/statistics/188185/percent-chance-
from-preceding-period-in-real-gdp-in-the-us/ (Links to an
external site.).
ed.). https://www.cengage.com
Britney Graves
Gross domestic product (GDP) is the total amount of money that
has been collected from products made in a country during a set
period. GDP is a common way for an economist to understand
if the economy is growing or hurting.
While GDP can be helpful, it’s essential to understand what
outputs are measured. As consumers, we buy products and
don’t realize the various stages it goes through to end up in our
hands. With that said, when a good flows through multiple
stages before completion its called “intermediate goods” and
shouldn’t be counted in GDP. (Gwartney, Stroup, Sobel &
Macpherson, 2018) explains that “final market goods and
services—those purchased for final use rather than for resale or
further processing” (p. 7-1a). Final market goods are the only
goods that should be counted to evaluate GDP because the
intermediate good is eventually going to turn into final
goods. At this point, counting both types of goods would lead
to a double count and will cause serve miscalculation of the
economy. The expenditure approach is one way to measure the
GDP and can be done by totaling the expenditures on goods and
services produced within one year. Also, GDP can be totaled by
adding the income payments to the cost of the resources that
contributed to making the good, which is called the resource

cost-income approach.
In the graph below, you can see, the 2019 Q1 was 3.1%, Q2
was 2%, and Q3 and Q4 are 2.1%. Therefore our economy has
increased by 2.1 percent in Q4.
Regardless of the business, the economy has a direct impact on
business outcomes. As we know, the GDP is an indicator of the
economy’s current and future performance. Therefore, GDP is
mentioned so often in business news because it gives confidence
to investors as to if they should or shouldn’t invest in a
company. For example, if the economy is booming and the firm
is hiring more people to keep up with demands, then
investments will be a good idea. On the other hand, if a
company is barely keeping its head above water and the
economy is in a recession, then investing may scare off some
people. In a sense, GDP is used as a metric for our economy
because it’s a trust system that can be used to shed light on the
future of our economy. “GDP is an accurate indication of an
economy’s size. The GDP growth rate is probably the single
best indicator of economic growth” (Picardo, 2019, p.
1). However, that doesn’t mean it’s 100 percent right all the
time. There are some transactions that the government can’t
track like black-market purchases or a child getting paid for
mowing their neighbor’s lawn. Therefore, if the purchase can’t
be tracked, it can’t be counted towards GDP. While GDP might
be the best way to track our economy, it’s essential to take
those numbers with a grain of salt. With that said, there are
other benefits and disadvantages of GDP. The most beneficial
thing about GDP is it provides insight into our economy; if
things are on the decline, then the government can chime in and
try to correct the recession before it gets too bad. On the other
hand, GDP doesn’t account for harmful impacts like pollution
that companies have on our world when they create a good that
goes to an end-user. Therefore, GDP isn’t painting the entire
picture, only a glimpse.
Unlike GDP, real GDP accounts for changes in price like
inflation or deflation; therefore, it provides a better look at

economic growth. Our textbook describes a situation of a
24.4% increase in the U.S from 2009-2015. GDP would have
assumed this was solely because of real output; however, a large
portion of this increase was due to inflation. To find real GDP,
you divide the GDP from 2009 by the GDP of 2015 and multiple
by nominal GDP, which is the current market price for a good.
References
Duffin, E. (2020, March 26). U.S.: real GDP growth by quarter
2011-2019. Retrieved April 14, 2020,
from https://www.statista.com/statistics/188185/percent-chance-
from-preceding-period-in-real-gdp-in-the-us/ (Links to an
external site.)
ed.). Retrieved from https://www.cengage.com
Picardo, E. (2020, February 5). The Importance of the GDP.
Retrieved April 14, 2020, from
https://www.investopedia.com/articles/investing/121213/gdp-
and-its-importance.asp
Screen Shot 2020-04-14 at 12.30.10 PM.png
Guided Response: Review the posts from your classmates and
respond to at least two. How did their list of limitations differ
from yours? What does their analysis tell you about the role of
financial leverage in making financial decisions? Each response
should have a minimum of 100 words.
needs to be response. Lisa Jamesand Kyle Jablonski
Lisa James
MondayApr 13 at 8:10pm

Manage Discussion Entry
According to Block, Hirt, and Danielson (2019) “financial
leverage reflects the amount of debt used in the capital structure
of the firm” (pg. 133). Financial leverage can be risky so it is
important to understand the benefits and limitations of it.
One of the largest benefits is that it can lead to a larger return
on capital for the investor. This is done by increasing the debt-
to-income ratio. Taking on more debt can be seen as risky,
especially if the economy takes a dive and sales decrease, but in
a stable or growing market, the added risk can be very
profitable (Woodruff, 2020).
However, taking on additional debt can be a limitation,
especially if economic climates change. Sales and profits may
decrease, but overhead expenses will stay the same, or even in
some extreme circumstances, increase. Taking on additional
debt can potentially lead to a default in any loan payment
because of an inability to pay (Woodruff, 2020). Additionally,
common stockholders could drive down the price based on
concern (Block, Hirt, & Danielson, 2020).
It is important for a company to understand not only the current
economic climate they are in but also any economic projections.
This will help them to determine if the risk of additional debt
that will be experienced from a leveraged plan will be worth it.
If the answer is no, or even uncertain, the company may want to
go with the security of the conservative plan. Additionally, it is
important for a company to understand the amount of
outstanding debt they have before taking on any new debt.
Resources
Block, S. B., Hirt, G. A., & Danielson, B. R.
(2019). Foundations of financial management (17th ed.).
Retrieved from https://www.vitalsource.com/
Woodruff, J. (2020, March 23). The Advantages &
Disadvantages of Financial Leverage. Retrieved from
https://bizfluent.com/info-10071658-advantages-disadvantages-
financial-leverage.html

Kyle Jablonski
YesterdayApr 14 at 10:52pm
Manage Discussion Entry
One of the benefits when it comes to a company utilizing
financial leverage is additional funds being brought in to help
manage growth. According to Block, Hirt, and Danielson
(2019), “Highly leveraged firms, such as Ford Motor Company
or American Airlines, are likely to enjoy a substantial increase
in income as volume expands” (p. 131). With these borrowed
funds and more assets being available, tax benefits also play a
[positive role when a company is utilizing financial leverage.
According to Bragg (2019), “Favorable tax treatment. In many
tax jurisdictions, interest expense is tax-deductible, which
reduces its net cost to the borrower” (para 3). This leverage
allows for additional assets that are not generated from sales to
help with a company's growth by allowing them to utilize
resources that would not be available without financial
leverage. Much like when someone borrows money in the form
of a mortgage, one leverages their assets in order to purchase a
home they would not have been able to purchase otherwise.
With leverage comes potential downside and risk.
Some of the limitations that are associated with leverage is a
company over-leveraging their own assets. “When a firm takes
on debt, that debt becomes a liability on its books, and the
company must pay interest on that debt. High operating leverage
implies that a firm is making few sales but with high margins.
This can pose significant risks if a firm incorrectly forecasts
future sales” (para. 8-9). Much like when someone takes out a
mortgage to buy a house, someone could overextend their assets
or what they are bringing in as revenue and may not be able to
make up the debt. If an individual over leverages the assets they
only need to answer to themselves, but when a company over
leverages themselves, they have shareholders to report to.
According to Block, Hirt, and Danielson (2019), “Concerned
common stockholders may drive down the price of the stock—

forcing us away from the objective of maximizing the firm’s
overall value in the market” (p. 131). Driving down the price of
the stock would negatively affect the companies' all already
existing assets. This would be potentially high risk and
comparable position. This could lead to a company going out of
business or filing for bankruptcy.
It is important to take into consideration as a company why the
risk of taking on debt and how long is the company going to be
extending themselves. According to Block, Hirt, and Danielson
(2019), “Those who are risk-averse (prefer less risk to more
risk) should anticipate a particularly high return before
contracting for heavy fixed costs. Others, less averse to risk,
may be willing to leverage under more normal conditions. The
important idea, which is stressed throughout the text, is to
match an acceptable return with the desired level of risk” (p.
130). A useful way a company can utilize financial leverage is
during the purchase of another company. For example, if the
company is showing a constant positive cash flow of 1m dollars
and the purchasing company is going to borrow 1m dollars for
the purchase of this company, this would be a conservative way
of utilizing leverage. If a company is going to take on debt to
run a Super Bowl commercial, it is hard to determine what the
return would be and how long the company would be in debt in
order to run this advertisement. This would be a much riskier
way of using leverage because the time frame is unknown and
acquiring the same or similar results may be able to be
accomplished without having to leverage the company’s assets.
References:
Block, S. B., Hirt, G. A., & Danielson, B. R. (2019).
Foundations of financial management (17th ed.). Retrieved
from https://www.vitalsource.com/ (Links to an external site.)
Balasubramaniam, K. (2020). Operating Leverage and Financial
Leverage. Retrieved
from https://www.investopedia.com/ask/answers/06/highleverag
e.asp (Links to an external site.)

Bragg, S. (2019). Financial leverage. Retrieved
from https://www.accountingtools.com/articles/2017/5/14/finan
cial-leverage (Links to an external site.)
Guided Response: Review the posts from your classmates and
respond to at least two. Compare and contrast the points you
and your classmates made regarding the importance of preparing
a sales projection in the process of financial forecasting. Each
response should have a minimum of 100 words.
needs to be response. Shannan Doss and Gabriela Santos
Shannan Doss
Hello Class,
When organization want to project where they want to go, they
prepare a pro forma financial statement. This statement along
with the cash statement and that balance sheet, allows a
company to estimate their future expenses and possible profits
that they will gain. There are four steps that are used when
developing a pro forma income statement; establishing a sales
projection, determine a production schedule, computing other
expenses and determining profit by completing the actual pro
forma statement, (Block, Hirt, & Danielsen, 2019, p.98).
The first step in developing a pro forma income is critical
because, to have a meaningful and correct sales projection
allows the company to have an appropriate amount of inventory
in order to predict any future profits. It predicts the company’s
anticipated needs by assessing the past and current sales results.
The sales projection is measured in how many units are in
inventory and by the selling price per unit. “It is important for
financial managers to realize that projections are often
inherently risky” (Block, Hirt, & Danielsen, 2019, p.99).

Based on Deere’s Second-Quarter Reports, it states that the
company’s net sales and revenues are projected to rise 5% to
$10.3 billion. By the end of the second quarter, the company
reported a net income of $1.135 billion or $3.52 per share,
which had risen from the prior year’s net income of $1.208
billion. Results were favorable for the company in 2018,
however due to the discrete adjustments to the provision for
income taxes, the company was unfavorable affected by an $803
million tax reform. The equipment operating sales and profit net
sales were increased by 3%. The Agriculture & Turf sales’
numbers for the quarters were higher due to the higher shipment
price and volumes. The operations profits declined as well due
to the higher production costs. The company will need to adopt
more of a financial outlook for the agricultural sector.
Shannan D.
Reference:
Block, S. Hirt, G. A., & Danielson, B. R. (2019). Foundations
of financial management (17th edition) Retrieved
from https://www.vitalsource.com/ (Links to an external
site.) (Links to an external site.)
John Deere. (n.d.). Investor relations (Links to an external
site.) (Links to an external site.). Retrieved from
https://investor.deere.com
Gabriela Santos
The pro forma income statement is important because it is a
great way to guide a company into the future. The first step to
preparing a pro forma income statement is building a sales
projection. Based on the sales projection, the rest of the
statement comes together (Block, Hirt, & Danielson, 2019).
The sales projections are essential because they carry a lot of
weight for a company. The textbook warns that marketing teams
can promote optimistic sales projections that may not be met
based on current events. External forces, like gas prices, can

affect a business positively or negatively. When sales
projections are not met, it can negatively impact the company's
stock. It's advised that a good financial officer will evaluate
how risky sales projections are. It's also a good practice to
consider worst-case scenarios so a company is prepared just in
case (Block, Hirt, & Danielson, 2019).
Deere & Company shares its sales results within the context and
explain their numbers with text. While some of the numbers
show an increase in net sales, due to currency translation it
actually turns in to a negative downward trend from year-to-
date. They also make sure to show how gains and losses are
offset by other forces.
Issues that Deere faces is its flattening sales or declining sales
in several markets like in Asia. They also cite current currency
exchange rates as a problem for them. They share that their
projections are cautious due to the agricultural industry. As a
response, they are being strategic with inventory. Overall,
Deere is still optimistic about the future and hope with a new
plan they will be successful.
Resources:
Block, S. B., Hirt, G. A., & Danielson, B. R.
(2019). Foundations of financial management (17th ed.).
Retrieved from https://www.vitalsource.com/
John Deere. (n.d.). Investor relations (Links to an external
site.). Retrieved from https://investor.deere.com

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