Explain how high inflation rate affect the finance function in a corporation?

Question

How shortage of of long term capital affect the finace function in a corporation.
How active participation/interfernce of the government in the industry affect the finance function in a corporation?
How high risk economic and political environment of the country affect thr finance function in a corporation?

Answer 1

To answer your question I consider corporations as similar to individual people. Some corporations like say Berkshire Hathaway are incredibly cash / asset rich. As inflation goes up they drive more cash into assets. In inflation money devalues and assets increase in value. The asset-heavy corporation gains wealth.

Many companies are in debt up to their eyeballs. And the higher cost of capital without doubt cause a shake out of some of these corporations. Much like it will do for people that have over extended themselves.

Uncertainty comes in many different forms (be it economic, political, resources). Uncertainty has a capital cost that is also set by the market. One way I might describe it is as the difference between the Ask and Bid price in any market. The bigger the difference – the greater the uncertainty.