Inflation
- Created by: Nathan From Bristol
- Created on: 25-05-17 16:11
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Inflation measure the percentage annual rise in the average price level. Inflation reduces the purchasing power of money in the economy. The impact of inflation on a firms finances are mixed.
Advantages of inflation to a business
Real assets become worth more - The value of any property or stock that a business owns will become worth more if prices are going up. A firm with more valuable assets will look more attractive on the balance sheet. As a result of this a firm may be able to raise long-term finance from Banks and Shareholders becuase the business now looks more secure.
The real value of money owed is eroded - Firms with large borrowings also…
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