QUESTIONS 45 THROUGH 68 RELATE TO FINANCIAL STATEMENT ANALYSIS

61. Assume U.S. GAAP (generally accepted accounting principles) applies unless

otherwise noted.

An analyst gathers the following data about a company and the industry in which

it operates:

Company

Industry Averages

($ millions)

as a percent of sales

Revenues 5,000 100%

Cost of goods sold 2,100 45%

Operating expenses 1,750 32%

Profit margin 475 9.5%

Which of the following conclusions is most reasonable? Compared to the

industry, the company:

A. has the same cost structure and net profit margin.

B. has a lower gross profit margin and spends more on its operating costs.

C. is better at controlling product costs, but less effective at controlling operating

costs.