In an inflationary period, a firm is likely to show short-lived profit increases because ____.
A) accounts receivable collections increase
B) cash balances decline
C) inventory profits are realized
D) All of these are correct

Question

Quizplus · Accepted Answer

In an inflationary period, inventory prices tend to rise which allows firms to realize profits on inventory they already own. This can lead to short-term profit increases. Accounts receivable collections increasing or cash balances declining are not necessarily indicative of profit increases.

In an Inflationary Period, a Firm Is Likely to Show