Question 8Use the Common-Size Income Statement for Company A and Company B to answer this question.Company A Common Size$Company B $ Common Size %%Revenue$132,110100.0%89,597100.0%Cost of Revenue87.25766.0%60.02567.0%Gross Profit44,85334.0%29,57233.0%Selling, general and administrative24,44718.5%18,52920.7%Depreciation2.1281.6%1.3961.6%Operating profit18,27813.8%9,64710.8%Investment income47.036%11.012%Loss Debt Extinguishment10571.2%Interest Expense1.3471.0%8591.0%Income from continuing operations16,97812.9%7,7428.6%Provision (benefit) for income taxes4.1123.1%1,9072.1%Net income12,8669.7%5,8356.5%Which of the following reasons explain why Company A has a higher operating profit margin?Company A has higher tax expense relative to sales.O Company A has a higher markup and/or lower inventory costs.Company A has more investment income relative to sales.O Company A has more sales.

Operating profit margin is computed as = Operating profit / SalesOperating profit margin for company…

Use the Common-Size Income Statement for Company A and Company B to answer this question. Company A Common Size Company B $ Common Size % $ % Revenue $132,110 100.0% 89,597 100.0% Cost of Revenue 87,257 66.0% 60.025 67.0% Gross Profit 44,853 34.0% 29,572 33.0% Selling, general and administrative 24,447 18.5% 18,529 20.7% Depreciation 2.128 1.6% 1.396 1.6% Operating profit 18,278 13.8% 9,647 10.8% Investment income 47 .036% 11 .012% Loss Debt Extinguishment 1057 1.29 Interest Expense 1.347 1.0% 859 1.0% Income from continuing operations 16,978 12.9% 7,742 8.69 Provision (benefit) for income taxes 4.112 3.1% 1.907 2.19 Net income 12,866 9.7% 5,835 6.5" Which of the following reasons explain why Company A has a higher operating profit margin?

Use the Common-Size Income Statement for Company A and Company B to answer this question. Company A Common Size Company B $ Common Size % $ % Revenue $132,110 100.0% 89,597 100.0% Cost of Revenue 87,257 66.0% 60.025 67.0% Gross Profit 44,853 34.0% 29,572 33.0% Selling, general and administrative 24,447 18.5% 18,529 20.7% Depreciation 2.128 1.6% 1.396 1.6% Operating profit 18,278 13.8% 9,647 10.8% Investment income 47 .036% 11 .012% Loss Debt Extinguishment 1057 1.29 Interest Expense 1.347 1.0% 859 1.0% Income from continuing operations 16,978 12.9% 7,742 8.69 Provision (benefit) for income taxes 4.112 3.1% 1.907 2.19 Net income 12,866 9.7% 5,835 6.5" Which of the following reasons explain why Company A has a higher operating profit margin?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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