Table: Profit Margins This Table Shows That Silver, Copper, and Gold Were Some

question 74

Multiple Choice

Table: Profit Margins $$\begin{array} { l r r r r r r r r } \hline \text {Industry }& \begin{array} { l } \text { 1 Day Market } \\\text { Change \% }\end{array} & \text { Cap } & \text { P/E } & \text { RDE \% } & \begin{array} { l } \text { Div, } \\\text { Yield \% }\end{array} & \begin{array} { l } \text { Long-Term } \\\text { Debt to } \\\text { Equity }\end{array} & \begin{array} { l } \text { Price to } \\\text { Book }\end{array} & \begin{array} { l } \text { Net Profit } \\\text { Margin } \\\% ( \text { meg) }\end{array} \\ \hline \begin{array}{l}\text { Closed-end fund } \\\text {-Equity }\end{array} & -0.25 & 46.0 \mathrm{~B} & 0.00 & 0.00 & 3.70 & 29.23 & -1392.53 & 64.30 \\\begin{array}{l}\text { Publishing- } \\\text { periodicals }\end{array} & -1.49 & 23.1 \mathrm{~B} & 21.00 & 27.00 & 5.13 & 10.83 & 8.32 & 52.90\\\text { Closed-end fund } & & & & & & & & \\\text { - Foreign } & 0.77 & 18.1 \mathrm{~B} & 13.90 & 3.70 & 2.45 & 16.90 & 0.48 & 38.30 \\\text { Silver } & 0.44 & 67.8 \mathrm{~B} & 33.30 & 11.10 & 0.26 & 45.16 & 3.74 & 35.10 \\\text { REIT-diversified } & 0.00 & 1919.2 \mathrm{~B} & 0.00 & 11.10 & 6.46 & 69.94 & 1.67 & 35.00 \\\text { Copper } & 0.37 & 209.6 \mathrm{~B} & 19.00 & 26.70 & 2.24 & 31.69 & 3.64 & 23.50 \\\text { Application software } & -0.32 & 629.8 \mathrm{~B} & 18.30 & 24.40 & 1.46 & 33.86 & 11.62 & 22.70 \\\text { Gold } & 0.18 & 2082.0 \mathrm{~B} & 24.50 & 9.70 & 0.96 & 10.90 & 2.55 & 22.00\\\text { Internet information } & -0.95 & 380.6 \mathrm{~B} & 35.00 & 13.70 & 1.19 & 8.04 & 5.47 & 21.30 \\\text { providers } & 0.45 & 310.9 \mathrm{~B} & 16.00 & 73.40 & 4.90 & 209.37 & -8.30 & 20.20\\\text { Industrial metals } \\\text { and minerals }&1.70 & 44067.8 \mathrm{~B} & 20.50 & 19.00 & 1.88 & 27.41 & 4.58 & 19.90\\\text { REIT-Healthcare}\\\text {Facilities }&0.21 & 51.6 \mathrm{~B} & 49.30 & 3.90 & 4.47 & 97.94 & 2.10 & 19.80\\\text { Semiconductor- } \\\text { broad line }& 2.53 & 1175.3 \mathrm{~B} & 11.80 & 23.30 & 2.60 & 26.17 & 3.75 & 19.10 \\\text {Semiconductor- }\\\text { integrated circuits}&-1.23 & 155.2 \mathrm{~B} & 15.50 & 18.70 & 2.59 & 17.24 & 3.46 & 18.80\\\begin{array}{l}\text { Foreign utilities } \\\text { Diversified } \\\text { investments }\end{array} & -0.56 & 46.6 \mathrm{~B} & 11.40 & 24.20 & 3.53 & 76.36 & 36.49 & 17.00 \\& -0.52 & 120.1 \mathrm{~B} & 23.70 & 10.30 & 2.29 & 449.96 & 1.93 & 16.90\end{array}$$ This table shows that silver, copper, and gold were some of the most profitable industries in July 2011. (For each dollar of sales, profit for these industries is 35.1, 23.5, and 22.0 cents, respectively.) According to the elimination principle, what do you expect to happen to these profit margins in the long run?

• A) Profit margins will increase because of increased entry.
• B) Profit margins will increase because of increased exit.
• C) Profit margins will decrease because of increased entry.
• D) Profit margins will decrease because of increased exit.

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Definitions:

Market Development

A growth strategy where a company seeks to sell its current products in new markets or new segments of existing markets.

Growth Strategy

A growth strategy is a plan of action designed to increase the size and scope of a business, by expanding its market reach, product portfolio, or operations.

Market Penetration

A measure of the extent to which a product or service is recognized and purchased by customers within a specific market.

Product Development

The creation of new or improved products or services to meet market demands, involving design, development, and marketing stages.