inflation changed? increased? decreased? inflation is enabled for the calculation?
where do you read this? The only context I can recall is in connection with valuation of the firm. If the firm can manage to pass the increased cost (due to inflation) of their COGS on to their customers, their firm valuation will not suffer/decrease as much in inflationary environment, but I believe it is level II stuff, not level I.
It means ignore inflation.
I recall the question. It has to do with whether or not “passed through” inflation will have any impact on some kind of valuation based on sales or net income yes? In this case, “pass through” means “effected for” or included. In a valuation model, your sales would be adjusted up for the effects of inflation. However, any earnings or sales multiplier you use to subsequently derive a value for the asset should have incorporated the inflation into what implicit discount rate is being used. So… “inflation passed through” means both the numerator and denominator are adjusted for inflation … and therefore have no impact on the final valuation.
well, there are degrees of passing through from 0-100% where inflation flow through rate= 100% is passing all cost increase to customers The exact formula for P/E in inflationary environment is P0/E1= 1/(real required return + (1-inflation flow through rate)* inflation rate))