Suppose Friendly Airlines is considering signing a long-term contract with the union representing its pilots. Friendly Airlines and the union both agree that real wages should increase by 2%. Inflation is expected to be 3%, so they agree on a 5% nominal wage increase. Now, suppose inflation turns out to be lower than expected, coming in at 2%. This would_harm the union and benefit Friendly Airlines because the real wage increase would now be Because of uncertainty about future infilation, the union devotes a large quantity of resources to monitoring inflation indicators in order to maximize its financial position. This illustrates the fact that: Inflation harms lenders and helps borrowers O Variable inflation is associated with high transaction costs O Inflation obscures relative price changes

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Financial Statements

Financial statements (or financial reports) are the formal records of the financial activities that are undertaken by a firm. They are convenient instruments used for analyzing a company’s financial position and performance. Financial ratios are created with the help of the numerical values that are derived from the financial statements. They give meaningful information about the financial performance of the company.