Blue Ace Autos Inc. and Ferdova Autos Inc. are two competing automobile companies. While Blue Ace Autos' Cost of goods sold/Reve
nue is 63.4 percent, the Cost of goods sold/Revenue of Ferdova Autos is 54.2 percent. What do you infer from this financial data? A. Blue Ace Autos is less efficient than Ferdova Autos in producing goods.
B. Blue Ace Autos has a higher profit margin than Ferdova Autos.
C. Blue Ace Autos and Ferdova Autos have achieved a competitive parity.
D. Blue Ace Autos is able to command a greater price premium for its products than Ferdova Autos.
A. Blue Ace Autos is less efficient than Ferdova Autos in producing goods.
Explanation:
The cost/ revenue ratio of Ferdova Autos is lower than that of Blue Ace, this indicates that for Ferdova Autos ,either revenue is higher or cost is lower than that of Blue Autos.
For example, let us imagine that the revenue of both companies is $60 million and th cost of production for Ferdova Autos is $32.52 (0.542 × 60 million ) million and that of the other company is $38.04 million (0.634 × 60).
We can see that Ferdova Autos spends less to generate the same amount of revenue. This means that Ferdova Autos is more efficient in production when compared with blue autos.
From the statement, it can be seen that G bought the life policy alone and made his decision to replace that coverage with a policy that was purchased firsthand through the insurer and delivered. This shows that an agent was not used in the sale or delivery of the policy and hence this depicts a direct response transaction between the insurer and the client G.
