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An evaluation of KBR Inc. with a macroeconomic perspective

The leading American Corporation

How would you assess the overall financial well being of your organization?

What are good and unhealthy indicators, if any, in your outlook? KBR, Inc (formerly Kellogg Brown and Root) is a number one American Corporation that’s involved in a number of companies corresponding to engineering and building (KBR, Inc. , 2008). The company is concerned in two segments, Energy and Chemicals; and Government and Infrastructure. It also features in know-how and joint ventures.

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KBR was employed by the George W.

Bush Administration to repair damaged oil fields and other related assignments in Iraq (Eckholm, 2005). KBR was paid a whopping $ 2.5 billion for the work. Now, in the Obama Administration, the Government and Infrastructure segment might be much less operative as Obama continues to reveal plans to drag out of Iraq (ObamaBiden. com, 2009). KBR’s monetary scenario can be understood by viewing some of the key monetary ratios of the corporate. Sales have dropped by 9.22 % in the 12 months ended 2007 as compared to the previous 12 months.

However gross revenue has increased by around 50 % over the identical period, indicating a higher decrease in Cost of Goods Sold, subsequently KBR have been more efficient in their operations over the 12 months 2007. This has resulted in an increase of round 80 % in the Net Profit and the Operating Expenses rose by solely 19 % in the same interval. Current ratio has risen from 1.31 instances to 1.55 times. This means that the liquidity of the company is improving and it’s in a greater position to handle its every day operations.

Debt to fairness ratio has decreased from 2.

03 instances to 1.30 instances. This is evidence that the riskiness of the firm has decreased and it’s taking a extra secure stance in the wake of the financial state of affairs. Return on equity has elevated from around 5 % to 9 % due to the increase in Net Profit over the year. Looking on the figures above, the overall power of the company has improved over the 12 months. The company must consolidate as it’s going to have fewer operations related to navy as the current US government is planning the pullout from Iraq.

It has to take a position extra time and money in different sectors.

To what extent is your organizations financial well being affected by the Fed’s coverage on cash and curiosity rates?

As KBR is a big group with billions of dollars and hundreds of staff working in various states, it’s just like different large companies in the reality that it is affected to a bigger extent than smaller firms are affected.

If the Fed follows a contractionary financial policy and reduces the supply of money from the market, the price of money, that is the rates of interest increases according to the pure theory of demand and provide. If supply decreases, as within the case above, the rates of interest are pushed up and it turns into costlier to borrow money. This implies that investments will lower as folks take fewer loans. Growth within the economy decreases and consequently, inflation decreases and unemployment figures increase.

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