Manufacturing management and business planning should be carried out with an inflationary factor in order to maximize the existing economic realities. Inflation, which depreciates over time the money in circulation, affects almost all aspects of the financial activities of any enterprise. It is especially necessary to take this factor into account when conducting long-term financial transactions.
Instructions
Step 1
The inflation rate and index are the values that are used to quantify inflationary processes. The inflation rate makes it possible to assess the dynamics of the process - its change over time, and, therefore, helps to take inflation into account in long-term planning and predict with a high degree of probability the development of the situation in the financial markets. This indicator reflects the rate of depreciation of the money supply and the decline in the purchasing power of money over a certain period.
Step 2
The inflation rate is defined as the increase in the average price level to their nominal values at the beginning of the study period, expressed as a percentage. When concluding long-term contracts with galloping inflation, when the price growth index is more than 10%, it is necessary to take into account the projected annual inflation rate and include it in the calculations.
Step 3
Information on the expected average monthly inflation rate can be found in the published forecasts of the country's economic development for the coming period. These forecasts become the basis for taking into account the inflation factor in the economic and financial activities of the enterprise.
Step 4
The year-end inflation rate (TIi) can be calculated using the formula:
TIi = (1 + TIm) n - 1, where:
TIm is the expected average monthly inflation rate in the coming year, n is a degree, which is equal to the number of months in a year, i.e. n = 12.
Step 5
Using this formula, you will be able to determine not only the projected inflation rate for the current year, but also in any future period, which may be equal to several years. In this case, only the value of the power n will change, to which it is necessary to raise the number (1 + TIm).
Step 6
The quantitative value of the topic of inflation is used in calculating the projected annual inflation index (IIi):
IIi = 1 + TIi, or
IIi = (1 + TIm) n.
Step 7
To formulate a real interest rate that will actually take into account the rise in inflation, a projected interest rate should be used as reflected in the value of futures and options contracts entered into on the stock exchange.
