In the Past, Only India's Elite Could Afford to Buy

question 176

Short Answer

In the past, only India's elite could afford to buy a car. But recent dramatic changes in India's economy have produced a growing middle class and rapidly rising incomes. Now, to meet the new demand, established automakers are introducing smaller, more affordable vehicles into India. But they will have to find a way to compete with India's Tata Motors, which has unveiled the least expensive car ever in this market, the Tata Nano. The Nano sells for only 100 000 rupees (about US $2,200) . It seats four passengers, gets 50 miles per gallon, and travels at a top speed of 60 miles per hour.
Based on the information above, Tata most likely believed that as a result of recent changes in India's economy, what would be true of a growing number of Indian consumers?
They had become even more cost-conscious than ever before.
They would be willing and able to spend 100 000 rupees on a car.
They would choose a vehicle with high fuel efficiency primarily because of concern about the natural environment.
They will eventually prefer models similar to those currently available in the U.S. and Europe.
They will place a higher value on car safety than fuel economy.

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Definitions:

Operating Revenues

Income generated from the core business activities of a company, excluding any revenue from investments or secondary operations.

Other Revenues and Gains

Income generated from activities not directly related to the primary operations of a business.

Multiple-Step Income Statement

A multiple-step income statement is a more detailed financial statement that separates operating revenues and expenses from non-operating ones, providing insights into the different aspects of a company's performance.

Income From Operations

Also known as operating income, it reflects the revenue from a company's principal business activities minus its direct operating expenses (excluding non-operating income and expenses).