Suppose two companies have identical profit margins.However,Company A has a higher gross margin than company B.Which one of the following would best explain how company B ends up with the same profit margin?
A)Company A has a more efficient supply chain.
B)Company A has a higher asset turnover rate.
C)Company B has a more efficient supply chain.
D)Company B has a higher asset turnover.

Question

Quizplus · Accepted Answer

Company B having a more efficient supply chain could explain how it ends up with the same profit margin as Company A despite a lower gross margin. This efficiency in the supply chain could lead to lower operating costs, compensating for the lower gross margin and resulting in an equivalent profit margin.

Suppose Two Companies Have Identical Profit Margins