Impact of inflation financial management is basically concerned with acquisition financing and management of assets of business concern in order to maximize the wealth of the firm for its owners the inflationary situation will have direct impact on the financial decisions. Inflation is inextricably intertwined with the key problem of financial management namely the determination of the cost of capital in the absence of the cost of capital investment financing and d ividend decisions are not possible because they are dependent upon valuations which are based on the cost of capital in inflationary periods the effects of inflation must be correctly . At the end of the day an inflationary environment requires a more nuanced understanding of the time value of money effective financial management becomes the key to operational success even at the expense of operational efficiency the case for deflation thus inflation is unjust and deflation is inexpedient. Inflation and financial statement analysis in financial management inflation and financial statement analysis in financial management courses with reference manuals and examples pdf another effect of inflation on financial statements is the tendency for the value of fixed assets to be understated also to the extent that inflation
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