A large multinational retailer is looking for ways to increase profits. Given it

Question

A large multinational retailer is looking for ways to increase profits. Given its impressive record of growth, the sales and marketing vice president wants to target a 5.5% increase in sales to meet the profitability goals. The company currently has revenues of $54 billion (annually), spends 58% of its revenues on purchases, and has a net profit margin of 3.00%. You are a buyer working for this company and you want to show the vice president that it may be easier to reach the profitability goals by lowering purchasing expenses.

If the company achieves its revenue growth target of 5.5%, by how many dollars would revenue increase? $___ billion (Round your answer to two decimal places.)

Assume that revenues stayed flat (meaning the company did not try to increase sales by the 5.5% target), by what percentage would they have to decrease purchasing expenses to equal the increased profit that would have come from a 5.5% increase to revenues?____ % (Round your answer to four decimal places.)

(This question is to stretch your mind a bit. There will not be a question like this on any assessment.) The sales increase targeted percentage is __?___ times bigger than the required percentage decrease in purchasing expenses. (Round your answer to two decimal places.)

Explanation / Answer

If the company achieves its revenue growth target of 5.5%, by how many dollars would revenue increase?

Company's revenue = $54 billion

Revenue growth = 5.5% of $54 billion = $2.97 billion

Assume that revenues stayed flat (meaning the company did not try to increase sales by the 5.5% target), by what percentage would they have to decrease purchasing expenses to equal the increased profit that would have come from a 5.5% increase to revenues?

We have to achieve an increase of $2.97 billion in revenues.

Initial Purchasing expenses = 58% of $54 billion = $31.32 billion

% decrease in purchasing expenses = 2.97/31.32 *100 = 9.4828%.

The sales increase targeted percentage is __?___ times bigger than the required percentage decrease in purchasing expenses.

5.5/9.4828 = 0.58

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.