If a Vendor Has Correctly Used Marginal Analysis to Select

question 9

Multiple Choice

If a vendor has correctly used marginal analysis to select their stock levels for the day (as in the newsperson problem) , and the profit resulting from the last unit being sold (C_u) is $120 and the loss resulting from that unit if it is not sold (C_o) is $360, which of the following is the probability of the last unit being sold?

• A) Greater than 0.90
• B) Greater than 0.85
• C) Greater than 0.75
• D) Greater than 0.25
• E) None of these

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Definitions:

Debt-to-equity Ratio

An indicator of the distribution between shareholders' equity and borrowed funds in financing a company's assets.

Times Interest Earned Ratio

A financial metric that measures a company's ability to pay its interest expenses with its before-interest earnings.

Gross Margin Percentage

A financial metric indicating the percentage of revenue that exceeds the cost of goods sold, representing the proportion of each sales dollar that is gross profit.

Return on Equity

A measure of financial performance that calculates the return on shareholders' equity investments.