Assume That Two Firms Have the Same Operating Profit Margin

question 29

Multiple Choice

Assume that two firms have the same operating profit margin of 28%. Firm A has a net profit margin of 14%, however, while Firm B has a net profit margin of 18%. Which of the following
Is the probable reason for this?

• A)Firm A has a higher cost of goods sold than Firm B.
• B)Firm A has more interest expense than Firm B.
• C)Firm A has more depreciation and amortization expense than Firm B.
• D)All of the above are possible reasons for the stated results.

Evaluating the trade-offs between efficiency and equity in resource allocation.

Comprehending the concept of opportunity cost and its role in decision-making.

Understanding the rationale for individuals allowing for leisure in their schedules.

Applying marginal analysis to make business decisions.

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Definitions:

Reliability

The consistency and stability of measurements or assessments over time.

Validity

The degree to which a tool, test, or measure accurately represents or measures what it claims to.

Variability

The extent to which data points in a set differ from each other and from the average, indicating the spread or dispersion.

Reactivity

The tendency of participants to change their behavior due to the awareness of being observed or studied.