• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

inflation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › inflation

  • This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 11, 2019 at 4:01 pm #552220
    polly215
    Member
    • Topics: 4
    • Replies: 3
    • ☆

    Hi,

    Would you be able to help please?

    I’m having trouble understanding how to calculate the working capital /sales using inflation for NPV/APV..sometimes it is to multiply inflation rate to the power of the year and sometimes it is just to multiply inflation rate alone.

    eg Dec 2018 Q3 working capital calculation – multiply inflation rate alone
    but Jun 2014 Q2 sales and costs calculation – multiply inflation rate to the power of the year

    When exactly do I multiply using the power of the year?

    Many thanks!

    November 12, 2019 at 6:58 am #552266
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Sales and costs inflate each year at the rate of inflation. So if the sales are $100 at current prices and there is inflation at 5% per year, they will be 100 x 1.05 in 1 year, 100 x 1.05^2 is 2 years, and so on.

    The level of working capital also inflate. If we need $100 at time 0 and there is inflation at 5%, then we need a total of 100 x 1.05 = 105 at time 1. However since we already have 100, we just need the extra 5 at time 1 so as to bring it up to 105. Similarly at time 2 we need the total to increase to 105 x 1.05 = 110.25. However again we already have 105 so all that is needed is the extra 5.25 (which is obviously the same as 105 x 5%).

    I hope that makes sense 🙂

    November 12, 2019 at 12:06 pm #552302
    polly215
    Member
    • Topics: 4
    • Replies: 3
    • ☆

    Thanks very much John!

    November 12, 2019 at 4:56 pm #552338
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are very welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘inflation’ is closed to new replies.

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • Salimbek909 on The nature and structure of organisations – ACCA Paper BT
  • Sefater on Chapter 3 – Property Income and Investments – Individuals TX-UK FA2023
  • adityachaudhry on Discounted cash flow techniques (part 3) – ACCA (AFM) lectures
  • nuripamir on ACCA Administrative Review
  • Jherddie on CIMA E3 Chapter 8 Test

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in