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." Another manager at AB Distributor, Shawna, suggests that if the company's revenue had not increased, it would not have been able to increase its profits. Which of the following points out a flaw in Shawna's reasoning?
A) Other similar companies have increased their profits too.
B) Revenue is not always relevant to figuring profitability.
C) Profitability is not the only objective of the company.
D) The company can increase revenue only by cutting costs.
E) It is possible to increase profits by lowering costs.

Question

Quizplus · Accepted Answer

Shawna's reasoning overlooks the fact that profitability can be improved not just by increasing revenue, but also by reducing costs. Therefore, even without an increase in revenue, the company could still increase its profits by lowering its expenses.

AB Distributors Is a Company That Serves as a Shipping