Some considerations of Inflation on the negative effect on Companies
The presence of the inflationary phenomenon is present day by day and generates effects within any economy and in turn leaves havoc in a financial entity; therefore, the constant growth of the inflationary index, projects impacts on the profitability of lucrative organizations.
From another point of view, inflation can produce a positive bias in the profitability of companies, since in inflationary conditions sales (nominal terms) and costs tend to increase, but not for fixed costs, and this results in an increase in the profit margin for a time by overestimating income; a scenario that will depend on the increase in the inflationary rate, seniority and cost structure.
Therefore, the analysis of the inflationary impact on the economic profitability of the profit-making entity represents a very important and informative element for the management in order to know the effects of this phenomenon as a macroeconomic variable on the monetary situation with respect to the investment made to obtain profitable benefits.
Although it is true that generating profits is the purpose of any investment, latent economic factors in the economy are also limited; therefore, knowing the impact and effects of these factors on the monetary situation with respect to your economic results is fundamental for making decisions in accordance with the reality of today's business operations.
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I did not understand what your saying clearly atall... how inflation is a positive bias, as it will for a time lead to overestimation of profit margins?
How does inflation impat profitability of companies, I don't actually see this well explained!!