You invested $5,000 in the Cog corporation and $5,000 in the Gear corporation.Both of these corporations have $100 million in total assets.The Cog corporation had a net profit of $5 million and the Gear corporation had a net profit of $10 million.You read their annual reports and both companies had established a goal of having a net profit equal to 10% of total assets.

Question

Quizplus · Accepted Answer

Both corporations had the same amount of initial investment, but Gear corporation had a higher net profit, indicating that it was more effective. However, to determine efficiency, we need to compare the net profit to the total assets. The goal was to have a net profit equal to 10% of total assets, meaning that more efficient companies would have a higher net profit relative to their total assets. The Cog corporation's net profit was only 5% of total assets ($5 million/$100 million), while the Gear corporation had a net profit equal to 10% of total assets ($10 million/$100 million), indicating that Gear is more efficient. Therefore, Choice D is correct.

You Invested $5,000 in the Cog Corporation and $5,000 in the Gear