What benefit does converting sales and profits to constant dollars in times of inflation offer when analyzing a case?
A) It is helpful in predicting the future potential of the organization.
B) It contributes to determining the risk factors when computing the Z-value.
C) It shows the true performance of the corporation adjusted for inflation to make them comparable over years.
D) It is easier for the financial analyst to judge the effectiveness of management's decision-making.
E) It provides a method that is familiar and easy to understand.

Question

Quizplus · Accepted Answer

Converting sales and profits to constant dollars in times of inflation shows the true performance of the corporation adjusted for inflation to make them comparable over years. This is important because inflation can distort the reported performance of a company, making it difficult to compare year-over-year or to other companies. By adjusting for inflation, the performance of companies can be compared on an equal basis, allowing for more accurate analysis and better decision-making.

What Benefit Does Converting Sales and Profits to Constant Dollars