An increase in interest expense will decrease which of the following? 1. gross p

Question

An increase in interest expense will decrease which of the following? 1. gross profit margin; 2. operating profit margin; 3. net profit margin

1 only

2 only

3 only

2 and 3 only

1, 2, and 3

An increase in depreciation expense will decrease which of the following? 1. gross profit margin; 2. operating profit margin; 3. net profit margin

1 only

2 only

3 only

2 and 3 only

1, 2, and 3

Firms A and B have identical gross profit margins but B has a larger operating profit margin. Which of the following is the most likely explanation?

Firm A has all 12 of the CEO's children on the payroll as corporate VPs.

Firm A faces a lower corporate tax rate.

Firm A has a very wasteful, inefficient manufacturing plant that produces their widgets.

Firm A sells its product for a higher price.

Firm A's gross profit margin is much less than the other firms in the industry. Which of the following is the most likely explanation? All firms in the industry sell the same number of widgets.

Firm A uses more debt financing than the other firms.

Firm A is the only firm in the industry to whose employees are NOT members of a powerful union

The other firms have newer, more efficient manufacturing plants.

Firm A has a very effective advertising campaign.

1 only

2 only

3 only

2 and 3 only

1, 2, and 3

An increase in depreciation expense will decrease which of the following? 1. gross profit margin; 2. operating profit margin; 3. net profit margin

1 only

2 only

3 only

2 and 3 only

1, 2, and 3

Firms A and B have identical gross profit margins but B has a larger operating profit margin. Which of the following is the most likely explanation?

Firm A has all 12 of the CEO's children on the payroll as corporate VPs.

Firm A faces a lower corporate tax rate.

Firm A has a very wasteful, inefficient manufacturing plant that produces their widgets.

Firm A sells its product for a higher price.

Firm A's gross profit margin is much less than the other firms in the industry. Which of the following is the most likely explanation? All firms in the industry sell the same number of widgets.

Firm A uses more debt financing than the other firms.

Firm A is the only firm in the industry to whose employees are NOT members of a powerful union

The other firms have newer, more efficient manufacturing plants.

Firm A has a very effective advertising campaign.

Explanation / Answer

question 1 = 3 only

as interest is deducted from operatinf profit.

question 2 = 2 and 3 only

depreciaton is an operating expense

.

questn 3 = Firm A has all 12 of the CEO's children on the payroll as corporate VPs.

.

questn 4 = The other firms have newer, more efficient manufacturing plants.

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