You are analyzing 2 companies, and both companies have identical cost structures—each has 40% fixed costs and 60% variable costs. Company A experienced 10% revenue growth which resulted in a significant improvement in margins. Company B also experienced a 10% revenue growth, but much less improvement in margins. What conclusions can you draw regarding what was driving the revenue growth of each company?
You are analyzing 2 companies, and both companies have identical cost structures—each has 40% fixed costs and 60% variable costs. Company A experienced 10% revenue growth which resulted in a significant improvement in margins. Company B also experienced a 10% revenue growth, but much less improvement in margins. What conclusions can you draw regarding what was driving the revenue growth of each company?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hey guys sidenote, this is a credit analysis class. there are 2 things to consider, fix costs stay same. Variable costs will move in line with revenue.
Price is consider fix costs while volume is consider variable costs.
You are analyzing 2 companies, and both companies have identical cost structures—each has 40% fixed costs and 60% variable costs. Company A experienced 10% revenue growth which resulted in a significant improvement in margins. Company B also experienced a 10% revenue growth, but much less improvement in margins. What conclusions can you draw regarding what was driving the revenue growth of each company?
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