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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 8
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
1.2%
Interest Expense
1.347
1.0%
859
1.0%
Income from continuing operations
16,978
12.9%
7,742
8.6%
Provision (benefit) for income taxes
4.112
3.1%
1,907
2.1%
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?
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.
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