Monetary policy plays an essential determinant of the success of an organization’s operations. The financial investment and returns in an organization are significantly affected by the government’s imposing fiscal policies both to the households, businesses, and to financial institutions. This is a similar case that General Electric Company has experienced both directly and indirectly, especially after a series of fiscal policies imposed by the government. This paper outlines how some of the impacts that fiscal policies such as households tax reduction and government bail-outs have impacted the General Electric’s operational and financial returns. The paper outlines the benefits and drawbacks of bailouts to an organization as well as how to make the bail-out opportunity more beneficial to the organization. Tax rates reduction to households is one of the government’s fiscal policies that the government uses to enhance economic growth. The reduction of households taxes by 95 percent results to households having more disposable income. This is because the individual is able to save the extra money that they initially used in paying the taxes. Increased disposable income increases the households’ ability to spend and buy more products and services and, as a result, the firm’s sales are likely to increase. On the other hand, leads in high deficits and as a way of financing the deficit, thus reducing monetary circulation. This as a consequence leads to high-interest rates by the financial institutions such as banks and cooperative societies. Subsequently, it affects the organization’s ability to borrow the money for investments and expenditures, thus resulting in small productions and reduced profitability. The recent financial bailouts by the government have seen general electric emerge as one of the principal beneficiaries. General Electric succeeded in raising capital to finance its operations at a reduced interest rate. Initially, it did not qualify for these benefits but after a number of talks and appeals it was granted the rights thanks to some loopholes in the administration and in the end got the funding. Since its financial wing is not recognized as a bank, general electric acquired two small institutions in the banking sector. After acquiring the debt amounting to $340 billion, GE saw an increase in operations which translated to increased sales and profits. The expansion of the company is also associated with the bailout program.
Advantages and disadvantages of bailouts
Government bailout is a traditional form of easing financial burden of businesses as well as households. Some of the advantages of debt bailout include the fact that it involves massive reductions of the beneficiaries’ debt as opposed to minor discounts offered by financial institutions. This ensures that the debt is erased completely from the account, and the credit company cannot under any circumstance claim the money waived. The fact that it’s a government policy makes bail out legitimate. There are usually no hidden charges resulting from the process because it’s a form of government support as opposed to promotion in the business field. Citizens also have a choice of many companies when it comes to representation. Some of the disadvantages associated with the bailout include illegitimacy that comes with some unexplained charges. Many people complain about the challenge of choosing the best company to represent them in some companies overstate the benefits to attract clients who end up being disappointed when hit by the reality. This could, however, be rectified by stressing on sincerity in business.
Works Cited
Rosas, George. “An analysis of government responses to banking crises”. American Journal of Political Science 50, (2006): 175-91. Print.
