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📝 Impact of Inflation on Earnings
💸🔥 Impact of Inflation on Earnings🤔
First — what is Inflation?
👉 When the price of things (like milk, petrol, bread) keeps going up — that’s inflation! 🥛⛽🍞
✅ ₹100 last year could buy 10 chocolates 🍫
❌ Now ₹100 buys only 8 chocolates! 😟
That’s inflation making money’s value smaller.
But wait — how does this hurt (or help) company earnings? Let’s see! 👇
🔍 1. Costs Go Up 📈
✔️ Raw materials, wages, transport — everything gets costlier! 🚚💼
✔️ If a company can't raise its product price fast enough, its profits shrink! 😬
🧸 Example:
A toy-making company’s plastic and color cost rise by 20% — but if they don’t raise toy prices, their profit per toy falls.
🔍 2. Prices of Products Can Go Up Too 🏷️
✔️ If companies successfully increase selling prices — they can save or even grow profits! 💰
🛒 Example:
A soap company raises the soap price by ₹5 — inflation is covered — profits stay safe! 😃
But... If customers stop buying because of high price — sales drop! 😨
🔍 3. Consumer Demand May Fall 😟
If things get too expensive (because of inflation), people may buy less stuff!
🍔 People eat out less.
🚗 Buy fewer cars.
👗 Skip new clothes.
✔️ Result: Company sales and profits can fall.
🔍 4. Interest Costs Rise 💳
During high inflation, banks often raise interest rates.
✔️ Companies with loans pay higher interest — their profits fall! 💸
✔️ Borrowing becomes costly — less expansion, less growth. 📉
🔍 5. Impact on Earnings Per Share (EPS) 📊
✔️ Lower profits = Lower Earnings Per Share (EPS).
✔️ Stock prices may fall — investors don’t like falling earnings! 📉😬
✅ Sometimes, Inflation Helps Too!
✔️ If a company sells essential things (like food, medicine) — people must buy anyway — so they can raise prices easily! 🚀
✔️ Some businesses (like metal or oil companies) may even earn more during inflation as commodity prices rise! ⛽🔩
A company’s earnings in inflation are like a boat in rising water —
if built strong and flexible, it floats higher; if heavy and stiff, it sinks faster. 🚤🌊