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:

After-tax Holding-period Return

The return on an investment after accounting for taxes, over the period it was held, reflecting the true gain or loss.

Personal Trusts

Financial instruments in which assets are held by a trustee for the benefit of the trust's beneficiaries according to the terms of the trust agreement.

Risk Averse

A description of an investor's or institution's preference to avoid risk, opting instead for the most stable and predictable outcomes.

Investment Horizon

The total length of time that an investor expects to hold a portfolio or a specific investment before selling it.