In an inflationary period, a firm is likely to show temporary profit increases because
A) accounts receivable collections increase
B) cash balances decline
C) inventory profits are realized
D) all of the above

Question

Quizplus · Accepted Answer

In an inflationary period, the prices of goods and services rise, which means that the value of inventory increases over time. As a result, firms can sell their inventory at higher prices, generating temporary profit increases. Accounts receivable collections and cash balances may also be affected by inflation, but they do not necessarily result in profit increases for the firm.

In an Inflationary Period, a Firm Is Likely to Show