As the Fed has been increasing the interest rates, it has affected the loan policies of KBR. They have decreased the debt in their overall capital structure and this is reflected in their Debt to Equity ratio, which has decreased from 2.03 to 1.30. They are now looking to fund growth from internal operations and also stock issues. Common stock has increased from by around 27 % in the year 2007 as compared to 2006. Therefore, additional funds are entering through capital stock and increase in profits as mentioned earlier.
One more indirect effect of interest rate increase is on unemployment. As interest rates are hiked to stem the flow of inflation, jobs are also cut as growth decreases. There is a greater supply of workers than jobs available. This drives wages down as workers are willing to settle for less in tough times. KBR has to pay less to its workers in the United States and might also have to announce layoffs. KBR has more than 60 thousand workers in its company, so the unemployment rate has a great effect on the company (KBR, 2008).
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