Which of the Following Provides the best Rationale Regarding Analysts

question 61

Multiple Choice

Which of the following provides the best rationale regarding analysts' views about the information value of the gross profit rate versus the gross profit amount?

• A)The gross profit amount is more informative than the gross profit rate because it is a dollar amount rather than a ratio.
• B)The gross profit amount is less informative than the gross profit rate because the latter presents a meaningful relationship between gross profit and net sales.
• C)The gross profit amount is more informative than the gross profit rate because the gross profit rate is only used to describe a few industries while the gross profit amount is universally used.
• D)The gross profit amount is more informative than the gross profit rate because high volume operations are able to calculate the gross profit rate but not the gross profit amount.

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Definitions:

Durian Juice Concentrate

A thick, reduced extract of durian fruit, used as a base for beverages, flavoring, or food products.

Variable Cost

Costs that vary directly with the level of production or service activity.

Decentralisation

The distribution of decision-making powers from central authority to lower-level employees or divisions in an organization.

Goal Congruence

A condition in which the goals of the company's various employees and departments align with the overall objectives of the organization.