Widget Co and Tools Inc -Which of the Following Statements Is the Most Plausible Explanation

question 76

Multiple Choice

Widget Co. and Tools Inc. both operate in the same industry. They are capital-intensive companies producing widgets. Below are selected data:
$\begin{array}{lll}&\text { Widget Co. }&\text { Tools Inc. }\\\text { Net operating assets/common equity } & 1.37 & 1.53 \\\text { Net operating profit margin } & 19 \% & 21 \% \\\text { Income tax rate } & 47 \% & 28 \% \\\text { Revenues/net operating assets } & 0.81 & 0.61 \\\text { EBIT/revenues } & 38 \% & 32 \%\end{array}$
-Which of the following statements is the most plausible explanation of the difference in observed net operating profit margins?

• A)Widget Co's lower financial leverage
• B)Widget Co uses LIFO and Tools uses FIFO
• C)Widget Co's lower tax rate
• D)Widget Co's net operating asset turnover

---

Definitions:

Deinstitutionalization

The process of releasing individuals from institutional care (like psychiatric hospitals) to community-based treatment settings.

Follow-up Care

Ongoing health care given to a patient following the initial treatment of a condition, to monitor recovery and prevent recurrence.

Community

A group of people living in the same place or having a particular characteristic in common, often sharing a sense of belonging and mutual support.

ECT

Electroconvulsive Therapy (ECT) is a medical treatment that involves applying brief electrical pulses to the brain to induce controlled seizures, primarily used to treat severe depression and other mental health disorders.