Many forces at work impact inflation. There are current trends that cause both inflationary and deflationary measures. Whether we’ll see inflation or deflation in the future depends on which of these forces dominate.
Regardless of how profitable a company is, if the business is unable to generate cash to cover its creditors, the company will run the risk of bankruptcy and collapse.
When used to value a declining company, analysts will face special challenges as the characteristics of a declining company will cause some of the valuation model’s assumptions to break down.