Interest Rates

What do interest rates mean?

Interest rates simply mean when you borrow money at a 10% interest rate for a year, it means you have to pay back the amount of money you originally borrowed with the extra 10% interest. England’s current interest rate at the moment is 0.5%, which have been for three years since March 2009. Interest rates effects Cadbury in a series of things for example interest rates can have an impact on Cadburys usage of loans. This has an impact on Cadbury’s use of short-term loans, as they often take short-term loans to cover the cost for shortfalls in payroll or other expenses, so therefore having a high interest rate will make shortfalls cost more, as Cadbury have to pay more interest back to its lenders. Also it will affect Cadbury’s use of taking out long-term debts, which is important for a big business like Cadbury who take it for improvements or to undertake- large projects like constructing a new building. Therefore, having a high interest rate will mean the more costly the loan would be and less likely Cadbury will take it. The current interest rate affects Cadburys marketing strategies; as if it is low it allows Cadbury to reduce the price of their services and products. If the current interest rate was instead high it will under pressure the Cadbury’s consumers due to their loans to not buy luxury items such as chocolate or even because of Cadbury raising their products price to make better profit margin.

Inflation Rates

An inflation rate means the change of prices on a monthly or annual basis. In the UK the inflation rate is 2%, which means average prices rise by 2% every year. This means for Cadbury that soon they need to raise the price of their products because of the rise. However, inflation rates can affect Cadbury in a number of things. Firstly, inflation rates can affect interest rates for an example if Cadbury wanted to borrow money from a lender and the lender normally wants the money to be repaid with 10% interest,...