John Abner T.

Renolla
BSBA FM 4A

ACTIVITY 2

1. What is global financial recession.

Answer: A global financial recession is recession that affects many countries around the
world that is, a period of global economic slowdown or declining economic output.

2. What are the indicators that the International Monetary Fund used to declare global
economic recession today? Are these indicators also evident in the country?
Answer: One of the indicators of IMF is the effects of the Global Pandemic which greatly
affects employment, supply chain, financial businesses, stock exchange and etc. these are
also seen in the economy of the Philippines as well as the whole world.

3. Compare the global financial recession suffered in 2009 and the financial recession
brought by the spread of COVID-19
Answer: The Great Recession was systematic and first took hold in financial systems
while the global financial recession occurring today is a cyclical crisis cause because the
economy was brought to a sudden standstill in response to a health crisis. Economist say
that in 2020 it would surpass the great recession back in 2008 as it was supply and
demand crisis where the manufacturers of majority of the companies around the world
stop operating and jobs were to become vacant.
According to the International Monetary Fund’s latest forecast, the Global GDP
could fall 3% in 2020, Compared to a 0.1% decline in 2009. If this scenario continue it
would be the worst economic crisis since the 1929 Great Depression.

4. How do you think Philippines will perform under this global economic recession
considering that the country was able to remain strong even the 2009 recession?
Answer: given that the Philippines survived the great recession, the Philippines would
survive the global recession if only the Philippines would be on time to address the
pandemic that affects the economy. As we can see there are still uncertainty of what
damage the pandemic can afflict to economy, so the Philippines must be ready in order to
survive.

5. List down possible effects of this global economic recession to business entities in the
country. Answer should focus on working capital management and financial
performance.
Answer: first, when sales revenue and profit starts to decline, a company might and
will be forced to cut back on hiring new employees, or freezing hiring entirely. In an
 effort to cut costs and improve the bottom line, the manufacturer may stop buying new
equipment, curtail research and development, and stop new product rollouts.
One of the first impacts recessions have on businesses tends to be a tightening of
credit conditions and even large businesses may face difficulty turning over their debt,
which most are dependent on to finance ongoing operations. A recession will also
dampen a company's accounts receivable (AR) and liquidity issues impact consumers and
businesses up and down the supply chain. With reduced revenues, the affected company
may be forced to pay its own bills slower, later, or in smaller increments than their
original credit agreement required. Making late or delinquent payments will reduce
the valuation of a corporation's debt, bonds, and its ability to obtain financing. As of now
there are some Company that filed for Bankruptcy, companies like ALDO Group,
Bluestem Brands, Flybe, Gold’s Gym, J.Crew and many more.
Falling stocks and Slumping Dividends are also the effects of the pandemic to
the businesses. As declining revenues show up on its quarterly earnings report, the
manufacturer's stock price may decline. Dividends may also slump, or disappear entirely.
When the manufacturer's stock falls and the dividends decline or stop, institutional
investors who hold that stock may sell and reinvest the proceeds into better-performing
stocks. This will further depress the company's stock price.
Employee Lay-Offs and Benefit Reductions will also be affected as the
business may cut employees, and more work will have to be done by fewer people.
Productivity per employee may increase, but morale may suffer as hours become longer,
work becomes harder, wages increases are stopped, and fear of futher lay-off persists.

6. As a business course student, how do you think businesses can mitigate the effects of this
global economic recession? Give concrete plans related to treasury management.
Answer: first, is the protecting of the cash flow as we all know money must continue
inflowing and outflowing for optimum business health, with the obvious goal being that
you bring in more income than you must spend on expenses. You'll have expenses as
long as your business exists. Strategies must taken from increasing sales or billable
services to trimming unnecessary expenses.

Second, Review Inventory Management See in anything can be done to reduce

your inventory cost without sacrificing the quality of goods sold or inconveniencing your
customers. Maybe you’re ordering too many of particular items, or something can be
sourced somewhere else at a better price

Third, Watch Your Credit Scores Hard times make it harder to borrow, and small
business loans are often among the first to feel the squeeze, particularly for businesses
with iffy credit ratings. Monitor yours frequently and keep on top of them.

The business should also manage staff. Make sure to have an updated human
resource plan on your company, use plan to detail the staffing cost
7. Consider yourself as part of the Government Economic team, what do you think should
be done to atleast lessen the effect of this global economic recession to this country and
its economy

Fiscal policy – When the government influences demand through changing spending or
taxes.
 Government investment in new infrastructure (e.g. New Deal in the 1930s) helps
to stimulate demand and creates jobs.
 Income tax cuts – increasing the disposable income of workers, encouraging them
to spend.
Monetary policy – When Central Bank influences demand and supply of money.
 Cutting interest rates – makes borrowing cheaper and should increase the
disposable income of firms and households – leading to higher spending.
 Quantitative easing – when Central Bank creates money and buys bonds to reduce
bond yields and
Supply-side policies - Long-term policies to try and improve productivity and efficiency
in the economy.
 Free market supply-side policies – reducing government intervention in the
economy, e.g. lower taxes
 Interventionist policies – government spending on education and training
IMF bailout – IMF give money to stem the loss of confidence and implement structural
adjustment policies, e.g. better tax collection, privatisation, price liberalisation.
Government bailout of industries/banks - To prevent loss of confidence in financial
sectors.

8. As a member of your family having knowledge of economics and business, how will you
ensure that your family is ready in case this recession becomes worse?

Giving credible information that will help my family survive as well as

educate them little by little about helping the economy, the do’s and don’ts in
managing everyday finances also teach them to allocate funds to everything that is
important such as medical, food, necessities etc.