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 year.
D)It is easier for the financial analyst to judge the effectiveness of management's decision making.
E)It provides a method which is familiar and easy to understand.

Question

Quizplus · Accepted Answer

Converting sales and profits to constant dollars in times of inflation offers the benefit of showing the true performance of the corporation adjusted for inflation to make them comparable over the years. This is important when analyzing the financial performance of the company and comparing it to previous years, as it allows for a more accurate assessment of the company's growth and profitability.

What Benefit Does Converting Sales and Profits to Constant Dollars