As long as prices continue to rise faster than costs in an inflationary environment, reported profits will generally continue to rise.

Question

Quizplus · Accepted Answer

In an inflationary environment, rising prices can lead to an increase in reported profits, as the nominal value of sales and revenue increases. However, if costs also rise at the same rate or faster than prices, then profit margins may be squeezed and reported profits may not increase at the same pace. Therefore, the statement is generally true, as long as prices are rising faster than costs.

As Long as Prices Continue to Rise Faster Than Costs