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Why inflation may restrict the usefulness of the balance sheet as normally presented Examples?
Wiki User
∙ 14y ago
Most of the values are based on historical or original price. The balance sheet does not account for inflation, therefore the numbers will be incorrect when it comes to the actual price of inventory.
Wiki User
∙ 16y ago
Wiki User
∙ 14y agoBalance sheet figures are based off historical or original cost. Thus, plant, equipment, and inventory may be worth much more or much less than the actual reported cost due to inflation.
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Is inflation good for economic growth or not?
On my view, inflation is not good simply because normally it halt GDP, as a result the economy will not grow as there is a decline in GDP..In addition there will be no development taking place......BY: Hamunyela Oiva ,,a student UNAM, Windhoek..
Is shareholder wealth maximization short term or long term?
Buying stocks is normally a long-term investment strategy. The idea is that since there is always inflation, the value of your stocks should go up with time.
How are the inflation and unemployment related in short run?
In the short run, there is a negative correlation between the changes in wages (normally growth rate) and the rate of unemployment. Changes in wages imply changes of inflation. This relationship is known as Phillips' Curve, in honour of William Phillips, who discovered it in 1958.Thus, the bigger the rate of inflation, the lower the unemployment. This appealing consequence made politicians think that they could get the level of employment they want just by creating more inflation.Eventually this was not true, and studies after these years showed that this correlation fell apart, and there were combinations of high unemployment and inflation.Why was that? The answer is expectations. If individuals know that governments (or central banks) will follow a weak monetary policy (increasing the circulation of money in the economy and therefore generating inflation) they will expect the rate of inflation to be high. Trade unions will endeavour to get rises in wages, and this will impede companies to hire more workers. Thus if the monetary authority increase inflation now, it would not get reduction of unemployment.
How can targeting interest rates result in inflation sprialing out of control?
It could cause a kind of rubber-band effect on inflation. For instance, if the market is trying to keep interest rates high and the fed keeps dumping money into the market to try to keep interest rates low, one of these forces has to give. The market is going to be suddenly flushed with cash and risks an event that causes what would normally be a natural decrease in interest rates. This would cause a huge interest rate fluctuation and subsequent inflation.
What countries use hard currency?
The phrase "hard currency" is normally only applied to strong, stable, easily exchangeable currencies. This would include the US Dollar, Euro, GB Pound, Japanese Yen and several other currencies. Examples of non-hard currency would be things like the Zimbabwe dollar - where the notes are difficult to exchange for another currency and where the countries inflation makes the notes worth less each week.
Disinflation as compared to inflation would normally be good for investments in?
Disinflation as compared to inflation would normally be good for investments in bonds or gold.
How is merchandise inventory normally presented on a balance sheet?
it is an asset
When is South Africa's National budget normally presented?
Ghandi Thursday
Is inflation good for economic growth or not?
On my view, inflation is not good simply because normally it halt GDP, as a result the economy will not grow as there is a decline in GDP..In addition there will be no development taking place......BY: Hamunyela Oiva ,,a student UNAM, Windhoek..
What information that comes from personal interviews letters or request and questionnaires called?
at lower echelons how are recommended solutions normally presented
What information comes from personal interviews letters or request and questionnaire called?
at lower echelons how are recommended solutions normally presented
Do island nation become sea powers?
Normally, Britain & Japan are examples.
What vasodilators are normally used?
Examples of vasodilators are hydralazine (Apresoline) and minoxidil (Loniten).
What words with double n?
These can normally be verbs which are in their past simple tense. Examples include:finnedgunnedpinnedsinned
Do you put a colon after such as?
Normally there is no need for a colon, unless you are introducing a long list of examples.
Why was it so difficult to find an effective solution to inflation problems between 1964 and 1983?
It is due to the nature of economic policy. Normally inflation and unemployment are inversely related, so policy decisions can be made to cure one at the expense of the other (for instance, raising of interest rates lowers inflation but risks stifling business growth). During the period between 1964 and 1983, we experienced "stagflation" (high unemployment AND high inflation). So when we experience both at the same time, policy makers have their hands tied as to what to do. If they decide to try to get inflation lower, they risk making unemployment worse (and it's already bad) and if they try to get employment lower, they risk making inflation worse.
What is the relationship between inflation and interest rates?
Interest and inflation are related in one, main way, and that is through the fluctuation of available money. If the Fed decides that they are going to produce more paper money, then the average person will have more purchasing power, thus spend more on things they wouldn't normally. Because of the increase in money, in order to keep up businesses raise prices, thus causing inflation. Interest comes in to play because when inflation occurs, lenders want more money to be able to keep up with inflation. Because of this, they raise their interest prices to gain more money on their return. ***when the inflation rate rises, so does the items, including money barrowed by individuals or companies.
