A Profit Ratio for a Retailer of 4

question 24

Multiple Choice

A profit ratio for a retailer of 4.1% in year 2 compared to 5.5% for the previous year indicates:

• A) an improving profit margin.
• B) a declining profit margin.
• C) no change in the profit margin.
• D) impending bankruptcy.

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Definitions:

Price Fixing

The practice of colluding with other firms to control prices.

Marketing Channel

The paths or routes that products and services take from the time they are produced until they are purchased by consumers, including intermediaries such as distributors and retailers.

Horizontal Price Fixing

Occurs when competitors that produce and sell competing products collude, or work together, to control prices, effectively taking price out of the decision process for consumers.

Experience Curve Effect

Refers to the drop in unit cost as the accumulated volume sold increases; as sales continue to grow, the costs continue to drop, allowing even further reductions in the price.