Prioritize Finance

Hermann Simon and Adam Echter
Additional contact information
Hermann Simon: Simon-Kucher & Partners
Adam Echter: Simon-Kucher & Partners

Chapter 13 in Beating Inflation, 2023, pp 109-117 from Springer

Abstract: Abstract Inflation places new and heavy demands on financial management. The CFO must take greater responsibility and plays a key role in managing inflation. Inflation means that money becomes a “perishable fruit” and should be treated like one. It must be collected as quickly as possible and reinvested in assets that retain their value. A company’s goal should be to maintain profits in real terms. One should not be fooled by an increase in nominal profit, the so-called “money illusion.”. Every company’s weighted average cost of capital (WACC) will be driven up by rising interest rates and higher risk premiums during inflation making it more difficult to achieve an economic profit. Nevertheless, this target should not be abandoned. Inflation consumes cash and financial leaders must sharpen their cash focus during inflation. For pricing purposes, it is essential to refer to replacement costs, possibly supplemented by an add-on for the phantom profit effect.

Date: 2023
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-20093-9_13

Ordering information: This item can be ordered from
http://www.springer.com/9783031200939

DOI: 10.1007/978-3-031-20093-9_13

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().