Widget Co and Tools Inc -Which of the Following Statements Best Explains the Difference in Industry

question 32

Multiple Choice

Widget Co. and Tools Inc. both operate in the same industry. They are capital-intensive companies producing widgets. Below are selected data:
$\begin{array}{lll}&\text { Widget Co. }&\text { Tools Inc. }\\\text { Net operating assets/common equity } & 1.37 & 1.53 \\\text { Net operating profit margin } & 19 \% & 21 \% \\\text { Income tax rate } & 47 \% & 28 \% \\\text { Revenues/net operating assets } & 0.81 & 0.61 \\\text { EBIT/revenues } & 38 \% & 32 \%\end{array}$
-Which of the following statements best explains the difference in observed net operating asset turnover?

• A)Widget Co's lower financial leverage
• B)Widget Co uses FIFO and Tools uses LIFO
• C)Widget Co's lower tax rate
• D)Widget Co has significant operating leases and Tool Inc. has no leases

Understand the basic principles of supply and demand in a market economy.

Recognize the characteristics of perfectly competitive markets.

Identify the role of price takers and price setters in different market structures.

Define a market and understand the various types of markets.

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Definitions:

Property Taxes

Taxes levied by local governments based on the assessed value of real estate property.

Monthly Profit

The total amount of income a business generates in a month after all expenses have been subtracted from total revenue.

Target Return

A pricing strategy where the price is set based on a desired return on investment for a product or service.

Higher Horsepower

Refers to engines or motors with greater capacity to produce power, typically resulting in enhanced performance or capability.