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Sales and Average Operating Assets for Company P and Company

question 98

Multiple Choice

Sales and average operating assets for Company P and Company Q are given below:
 Sales Average  Operating Assets  Company P $20,000$8,000 Company Q $50,000$10,000\begin{array}{|l|r|r|}\hline & \text { Sales Average } & \text { Operating Assets } \\\hline \text { Company P } & \$ 20,000 & \$ 8,000 \\\hline \text { Company Q } & \$ 50,000 & \$ 10,000 \\\hline\end{array}
What is the margin that each company (Company P and Company Q,respectively) will have to earn in order to generate a return on investment of 20%?

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Definitions:

Absolute Advantage

The ability of an entity to produce more of a good or service than competitors using the same amount of resources.

Comparative Advantage

The ability of an entity to produce a good or offer a service at a lower opportunity cost than other entities, leading to more efficient trade possibilities.

Production

Production refers to the process of combining various material inputs and immaterial inputs (plans, knowledge) to make something for consumption (output).

Coolers

Devices or containers used to keep items cool or cold, often used for food and beverages.

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