What Benefit Does Converting Sales and Profits to Constant Dollars

question 69

Multiple Choice

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.

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Definitions:

Multiplication

A mathematical operation that calculates the total of one number added to itself a certain number of times based on another number.

Addition

The mathematical process of combining two or more quantities to get a sum.

Exponentiation

A mathematical operation involving two numbers, the base and the exponent, where the base is raised to the power of the exponent.

Division

A method of mathematical operation involving the process of dividing one number by another to determine how many times the divisor fits into the dividend.