Question

A recent industry report concluded that the global demand for the good X is expected to increase. Based on the demand projections given in the report​ Colaba, a firm that produces and sells​ X, is contemplating hiring more labor to increase production. Maria Williams and Christopher​ Lockhart, both stock market​ analysts, are discussing the prospects of the firm. Maria thinks that Colaba is a good stock to buy because she expects their profits to increase.​ Christopher's opinion differs. He says that an increase in​ Colaba's workforce will only increase the wage bill and reduce its profits. Which of the​ following, if​ true, would weaken​ Christopher's argument that​ Colaba's profits will​ fall?

A. Employee turnover in Colaba's research and development team has always been higher than the industry average
B. The growth in Colaba's earnings has declined in the last few quarters
C. Colaba recently restructured the shop floor layout which reduced the production cycle and the percentage of defective units
D. Colaba follows an assembly line method of production that is efficient O E. The distribution network for good X is highly fragmented

Answer 1

The answer is: C) Colaba recently restructured the shop floor layout which reduced the production cycle and the percentage of defective units

Step-by-step explanation:

Since Colaba produces good X, and the demand for it is supposed to increase in the future, that gives Colaba a great opportunity to increase their sales and profit. If Colaba mas become more efficient in producing good X, then their profit margins should be ever larger.