AB Distributors is a company that serves as a shipping intermediary for other companies. Its sales revenue has increased from the previous year. Jonathan, a sales manager at AB, says, "Since the company has increased its revenue, it is now more profitable." Which of the following points out a flaw in Jonathan's reasoning?
A) Information about the company's expenses is necessary to tell whether it is profitable.
B) AB Distributor may have lost money the previous year.
C) Most of AB Distributor's employees are relatively new.
D) Not all of the revenue may contribute toward profits.
E) Many of AB Distributor's competitors may not be doing as well.

Question

Quizplus · Accepted Answer

Jonathan's reasoning is flawed because he assumes that increased revenue automatically correlates with increased profitability. However, he fails to consider the company's expenses which could have also increased and ultimately affect the overall profitability of AB Distributors.

AB Distributors Is a Company That Serves as a Shipping