One of the most significant impacts of inflation on businesses is a decrease in purchasing power.
As prices rise, the value of money decreases, which makes it more expensive for businesses to purchase the same goods and services.
This means businesses must pay more for the same inputs, which reduces their profit margins.
Businesses must also adjust their prices upwards to maintain their profit margins, which can cause customers to reduce their purchases, leading to a decrease in sales.
Another effect of inflation on businesses is increased operating costs.
As prices increase, the costs of raw materials, labor, and other inputs also rise.
This makes it more expensive for businesses to produce goods and services, leading to reduced profits.