Help me please. Can’t get it.
On p. 214 there is an example 5. It is said that the increase in 1 % in inflation causes obligation to increase by 106 and expense to increase by 8.
And they calculate the new debt to equity with the following adj. =(total liabilities+106)/(equity -106).
The question is why (equity -106)? I don’t understand( Why not (equity -increased expense(8))? assume no taxes.
There are also similar adj. in example 6, p. 218.