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Identifying Long-Term Trends Term Paper

Long-Term Trends Short-Term Debt

Long-Term Debt

Common Equity

Total

The FedEx capital structure is mostly in common equity. The company does have some long-term debt, but this is only a quarter of the capital structure, indicating that FedEx is not a highly leverage firm.

The key economic variable for FedEx is the GDP, in particular the GDP growth rate. The GDP is the broad measure of economic activity. This is an important measure because FedEx has a broad corporate customer base, and as such its success is highly correlated with the broader economy. When the GDP is rising, this is good for FedEx's business. Now, if we are talking about expanding in Canada, then the key is to know where it might be useful to expand, as in finding out where the GDP is growing. That way, the new capacity will be filled more quickly. That is simply a matter of efficient resource deployment, to know where the economy is growing and then expand their.

Another important economic variable for FedEx is the unemployment rate. This is important because the company needs to set its wage levels. In order to set wage levels,...

There are places in Canada where the unemployment rate is very low, and there are places where it is considerably higher. The company will struggle to the extent that it has a mismatch of wages with the current job market. So knowing the unemployment rate is a good proxy for understanding how much bargaining power the workers have. The lower the unemployment rate, the more bargaining power the workers have, and as such the more FedEx is going to have to pay to attract workers to its expanded operations.
The purpose of this paper is to think about how different macroeconomic variables affect company performance. There are many economic variables, but they do not all have an impact on the company. Thus it is worth figuring out which variables are important, and why. This requires the manager to think about what drives the business, and in the case of FedEx it is the general overall health of the economy. But within that there are other things that need to be taken into consideration. Perhaps the most important is the unemployment rate, but there are other variables as well.

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