Rate of profitability in the conditions of inflation

Inflation issues are widely covered by a variety of state institutions, ranging from the media, ending with the government and various analysts. But this is mostly theoretical reasoning aimed at solving certain tasks of a particular group of people. More seriously, this issue interests ordinary citizens not in the macroeconomic plan, but in everyday, we can say, everyday. This issue is not ignored by representatives of medium and small businesses. So in what, in fact, this indicator of the economy is so important, because usually people perceive inflation only as a factor of price increase?

Estimation of inflation expectations

The fact is that inflation is largely able to influence such an indicator as the rate of return. Let's start with the fact that in the conditions of inflation, the price policy of any enterprise can not be predicted without taking into account inflationary expectations, in other words, without an adequate assessment of possible price changes, either in the market of services or products being produced, but also in the market of source material, . It is especially difficult to predict financial profitability in conditions of so-called unstable inflation, the changes of which are difficult to predict. And if in a short-term forecast this task can be solved with a greater degree of accuracy, then in the long-term, obtaining the right result is very difficult - the rate of profitability becomes almost unpredictable. In order to correctly estimate the inflationary expectation in the area of price strategy of the enterprise or other business entity, it is expedient to use so-called price indices. These indices are accepted in social and economic calculations, as well as in the practice of statistical research.

Calculation of inflation

In practice, the calculation of inflation expectations includes five main stages. First, financial profitability in the future depends on a competent and complete clarification of the price dynamics, especially those that are subject to forecasting. It is also necessary to determine and actually with the forecasting period, such as long-term, short-term or medium-term. If the profitability shows in a certain interval of forecasting the inefficiency of production, then it is necessary to introduce a number of changes in the business planning of the enterprise itself. Secondly, it is worth analyzing in the most careful way how the rate of profitability for the previous period looked, as well as all the analytical indicators of inflation, up to the factors that caused it. Thirdly, it is necessary to identify and take into account all the factors that in the future will be able to influence inflation rates taking into account their percentage impact. Next comes the calculation of the possible inflation itself. And the last stage is a probabilistic evaluation of all possible options for the development of a specific situation - from pessimistic to, respectively, optimistic.

Inflation, of course, is an inevitable process in any society. It only confirms the rule of the temporary value of any money. This means that the same amount of money is more valuable today, rather than tomorrow or, especially, the day after tomorrow. It follows that if profitability shows a low growth rate in an enterprise , then in the future the efficiency of production will invariably decrease due to the depreciation of assets. As a conclusion, the norm of profitability of any enterprise should be planned taking into account all possible risk factors , including taking into account inflation rates, as well as its objective indicators. It is worth remembering that the correct calculation of inflationary expectations may allow a more adequate forecast of further price policy.