Effect of Inflation on Financial Ratios: A Research in the Manufacturing Sector Traded in Borsa Istanbul

Erdem Saçan

Article Details

Effect of Inflation on Financial Ratios: A Research in the Manufacturing Sector Traded in Borsa Istanbul

Authors:

Erdem Saçan

Publisher:

Istanbul University

Main Topics:

İşletme

Journal:

Muhasebe Enstitüsü Dergisi Issue 71, pp.39-57

Document Type:

Article

Publication Date:

1/2024

Document Language:

Turkish

Document ID (Org No.):

2001326887

pISSN:

2602-3202

Keywords:

Abstract:

 Inflation is defined as a continuous and significant increase in the general price level, and it has profound effects on economic processes. Although this definition might seem like a superficial explanation of the phenomenon, a deeper examination reveals that the effects of inflation are quite complex and extensive. Inflation decreases the real values of assets and liabilities on the balance sheet, whereas changes in nominal values on the income statement prevent an accurate reflection of actual performance. In particular, during periods of high inflation, financial performance and business stability can be severely jeopardised. However, it is important to remember that the effects of inflation can vary depending on the sector, individual business, and economic conditions. Presenting financial statements adjusted for the effects of inflation ensures that the information is more consistent and reliable, which is crucial for users of financial statements to make more accurate decisions. To mitigate the adverse effects of inflation on financial statements, two approaches are employed: partial adjustment methods and permanent adjustment methods. This study discusses the practises used against the effects of inflation and offers suggestions on the subject. In this research, the financial ratios of companies in the manufacturing sector that traded on Borsa Istanbul BIST for a total of 30 periods in three-month quarters between the 2016Q2 and 2023Q3 periods were examined, and the effects of inflation on liquidity, financial structure, turnover rate, and profitability were examined. Their effects on rates were analysed. It was found that inflation has statistically significant effects on some financial ratios. These findings can help in understanding and analysing the effects of inflation on financial ratios, assisting businesses in making informed decisions and better evaluating their financial positions.

 Inflation is defined as a continuous and significant increase in the general price level, and it has profound effects on economic processes. Although this definition might seem like a superficial explanation of the phenomenon, a deeper examination reveals that the effects of inflation are quite complex and extensive. Inflation decreases the real values of assets and liabilities on the balance sheet, whereas changes in nominal values on the income statement prevent an accurate reflection of actual performance. In particular, during periods of high inflation, financial performance and business stability can be severely jeopardised. However, it is important to remember that the effects of inflation can vary depending on the sector, individual business, and economic conditions. Presenting financial statements adjusted for the effects of inflation ensures that the information is more consistent and reliable, which is crucial for users of financial statements to make more accurate decisions. To mitigate the adverse effects of inflation on financial statements, two approaches are employed: partial adjustment methods and permanent adjustment methods. This study discusses the practises used against the effects of inflation and offers suggestions on the subject. In this research, the financial ratios of companies in the manufacturing sector that traded on Borsa Istanbul BIST for a total of 30 periods in three-month quarters between the 2016Q2 and 2023Q3 periods were examined, and the effects of inflation on liquidity, financial structure, turnover rate, and profitability were examined. Their effects on rates were analysed. It was found that inflation has statistically significant effects on some financial ratios. These findings can help in understanding and analysing the effects of inflation on financial ratios, assisting businesses in making informed decisions and better evaluating their financial positions.

 Inflation is defined as a continuous and significant increase in the general price level, and it has profound effects on economic processes. Although this definition might seem like a superficial explanation of the phenomenon, a deeper examination reveals that the effects of inflation are quite complex and extensive. Inflation decreases the real values of assets and liabilities on the balance sheet, whereas changes in nominal values on the income statement prevent an accurate reflection of actual performance. In particular, during periods of high inflation, financial performance and business stability can be severely jeopardised. However, it is important to remember that the effects of inflation can vary depending on the sector, individual business, and economic conditions. Presenting financial statements adjusted for the effects of inflation ensures that the information is more consistent and reliable, which is crucial for users of financial statements to make more accurate decisions. To mitigate the adverse effects of inflation on financial statements, two approaches are employed: partial adjustment methods and permanent adjustment methods. This study discusses the practises used against the effects of inflation and offers suggestions on the subject. In this research, the financial ratios of companies in the manufacturing sector that traded on Borsa Istanbul BIST for a total of 30 periods in three-month quarters between the 2016Q2 and 2023Q3 periods were examined, and the effects of inflation on liquidity, financial structure, turnover rate, and profitability were examined. Their effects on rates were analysed. It was found that inflation has statistically significant effects on some financial ratios. These findings can help in understanding and analysing the effects of inflation on financial ratios, assisting businesses in making informed decisions and better evaluating their financial positions.

 Enflasyon, fiyatlar genel düzeyinin sürekli ve önemli artışı olarak tanımlanır ve ekonomik süreçler üzerinde büyük etkilere sahiptir. Bu tanım, olayın sadece yüzeysel bir açıklaması gibi görünse de aslında derinlemesine incelendiğinde, enflasyonun etkileri oldukça karmaşık ve geniş kapsamlıdır. Enflasyon, işletme bilançosundaki varlık ve kaynakların reel değerlerinde azalmaya neden olurken, gelir tablosundaki nominal değerler üzerindeki değişiklikler gerçek performansın doğru bir şekilde yansıtılmasını engeller. Özellikle yüksek enflasyon dönemlerinde, işletmelerin finansal performansı ve istikrarı ciddi şekilde tehlikeye girebilir. Ancak unutmamak gerekir ki, enflasyonun etkileri sektöre, işletmeye ve ekonomik koşullara göre değişkenlik gösterebilir. Finansal tabloların enflasyonun etkisinden arındırılarak sunulması bilgilerin daha tutarlı ve güvenilir olmasını sağlar, bu da finansal tablo kullanıcılarının daha doğru kararlar almaları açısından önemlidir. Enflasyonun finansal tablolar üzerindeki olumsuz etkilerini gidermek için kısmi düzeltme yöntemleri ve kalıcı düzeltme yöntemleri olmak üzere iki uygulama kullanılmaktadır. Bu çalışma, enflasyonun etkilerine karşı kullanılan uygulamaları ele almakta ve konuyla ilgili birtakım öneriler sunmaktadır . Araştırmada, 2016 Q2 - 2023 Q3 dönemleri arasındaki 3er aylık çeyrek dönemler halinde toplam 30 döneme ait Borsa İstanbulda BIST işlem gören imalat sektöründeki işletmelerin mali rasyoları incelenerek, enflasyonun likidite, finansal yapı, devir hızı ve kârlılık oranları üzerindeki etkileri analiz edilmiştir. Enflasyonun bazı mali rasyolar üzerinde istatistiksel olarak anlamlı etkileri olduğu tespit edilmiştir. Bu bulgular, enflasyonun mali rasyolar üzerindeki etkilerini anlamak ve analiz etmek, işletmelerin doğru kararlar almasına ve finansal durumlarını daha iyi değerlendirmelerine yardımcı olabilir.

Article Details

Effect of Inflation on Financial Ratios: A Research in the Manufacturing Sector Traded in Borsa Istanbul

Authors:

Erdem Saçan

Publisher:

Istanbul University

Main Topics:

İşletme

Journal:

Muhasebe Enstitüsü Dergisi Issue 71, pp.39-57

Document Type:

Article

Publication Date:

1/2024

Document Language:

Turkish

Document ID (Org No.):

2001326887

pISSN:

2602-3202

Inflation

Inflation Accounting

Financial StatementsEnflasyon

Enflasyon Muhasebesi

Finansal Tablolar

Issues

Article Details

Effect of Inflation on Financial Ratios: A Research in the Manufacturing Sector Traded in Borsa Istanbul

Authors: Erdem Saçan

Publisher: Istanbul University

Main Topics: İşletme

Journal: Muhasebe Enstitüsü Dergisi Issue 71, pp.39-57

Document Type: Article

Publication Date: 1/2024

Document Language: Turkish

Document ID (Org No.): 2001326887

pISSN: 2602-3202

Inflation

Inflation Accounting

Financial StatementsEnflasyon

Enflasyon Muhasebesi

Finansal Tablolar

Issues

Authors:

Erdem Saçan

Publisher:

Istanbul University

Main Topics:

İşletme

Journal:

Muhasebe Enstitüsü Dergisi Issue 71, pp.39-57

Document Type:

Article

Publication Date:

1/2024

Document Language:

Turkish

Document ID (Org No.):

2001326887

pISSN:

2602-3202