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Impact of Inflation on Firm Profitability: Evidence from Local Companies in Lusaka, Zambia

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Abstract

The study aimed at analysing how inflation affects the profitability of Zambian local companies. The objectives were anchored on establishing the effects of inflation on firms’ revenue, cost components and the strategies used by local companies to minimize the effects of inflation on the profitability of firms. Using Mixed-Methods Approach of qualitative and quantitative, 108 different firms from different industries were engaged in Lusaka, Zambia and analysed using Megastat. The results of the study showed that 96.3% of firm's’ revenue is not significantly influenced by inflation. The findings of the study revealed a non-statistically significant association between inflation rate category and firms’ average revenue as confirmed by the chi-square test results (x2=7.94. df=6, p=0.2427). The findings of the study demonstrated a significant impact of inflation on firms’ cost of component, with 96.4% of firms reporting to have increased cost components as a due to the increase in inflation. The chi-square test results confirmed an extremely highly statistically significant association between inflation rate category and the firms’ average total cost (x2=39.86, df=6, p=4.85E-07). 78.7% of firms reported that price adjustment is often used as the most effective strategy in mitigating effects of inflation on firms’ profitability (x2=22.63, df=6, p=0.0009). The findings of the study concludes that firms can effectively reduce the impact of inflation on firm profitability through price adjustment strategies. Therefore, it is recommended that local companies in Lusaka, Zambia prioritize price adjustments and regular price reviews to maintain firms’ profitability.

Keywords:

Cost Components Firms’ Profitability Firms’ Revenue Inflation Pricing Strategies

Article information

Journal

Journal of Economics, Business, and Commerce

Volume (Issue)

2(2), (2025)

Pages

260-269

Published

27-11-2025

How to Cite

Tembo, B. H., & Silwimba, P. (2025). Impact of Inflation on Firm Profitability: Evidence from Local Companies in Lusaka, Zambia. Journal of Economics, Business, and Commerce, 2(2), 260-269. https://doi.org/10.69739/jebc.v2i2.1120

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