GM506 diss 2

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Purdue University *

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GM506

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Economics

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Nov 24, 2024

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docx

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Uploaded by DrDinosaurPerson592

The impact of inflation on return on investments is in the profitability ratios group, which measures the firm's ability to earn enough through sales, total assets, and invested capital (Block et al., 2022). The inflation in this category can be the rising cost of the products. Furthermore, due to the pandemic, the community may have burnout from the government due to the stimulus money, which may contribute to inflation. The impact of inflation on inventory turnover and fixed asset turnover is in the asset utilization ratios group, which is measured through the speed of the turnover of accounts receivable, inventory, and longer-term assets (Block et al., 2022). Inflation can have an impact on how well a corporation uses its fixed assets to produce sales. The fixed asset turnover ratio may fall if the cost of acquiring or replacing fixed assets rises due to inflation. Finally, inflation can have an effect on the debt-to-asset ratio. If asset values rise due to inflation, the debt-to-asset ratio falls; yet, if inflation makes it more difficult for a corporation to repay its debt with income, the percentage rises. The impact of inflation on the debt-to-asset ratio is that the debt utilization ratios are evaluated by assets base and earning power (Block et al., 2022). The change in marginal tax rates has an impact on inflation and investors' personal income tax schedules. In addition, established cost coverage assesses an organization's capacity to repay all of its fixed

obligations rather than just interest payments, and financial reports are not correct because they are not considering inflation effects (Block et al., 2022). Overall, businesses must examine all of these various points of view in order to remain viable and successful.

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