Question

Research shows that approximately_____ percent of a firm's profitability is explained by the industry in which it competes, whereas ______ percent is explained by the firm's characteristics and actions.

a. 90, 10
b. 60, 40
c. 36, 20
d. 20, 36

Answer 1

b. 60, 40

Approximately 60 percent of a firm's profitability is explained by the industry in which it competes, and 40 percent by the firm's characteristics and actions.

Step-by-step explanation:

The question pertains to the factors that influence a firm's profitability.

Specifically, it asks what percentage of a firm's profitability is explained by the industry in which it competes, as opposed to the firm's own characteristics and actions.

While the question does not provide direct information, it is generally understood in strategic management that industry effects do play a significant role in determining firm profitability.

However, this effect is not as dominant as the characteristics and actions of the firm itself. Therefore, the answer that fits best with current business understanding is (b) 60 percent for the industry effect and 40 percent for the firm's own actions and characteristics.

This highlights the importance of strategic management and the competitive dynamics within an industry.

Research shows that approximately 70 percent of a firm's profitability is explained by the industry in which it competes, whereas 30 percent is explained by the firm's characteristics and actions.

Answer 2

Approximately 36% of a firm's profitability is explained by the industry it competes in, while 20% is explained by the firm's characteristics and actions.

Step-by-step explanation:

Research shows that approximately 36 percent of a firm's profitability is explained by the industry in which it competes, whereas 20 percent is explained by the firm's characteristics and actions.

Profitability is the dependent variable proxied by Return on sales (ROS), while firm characteristics is the independent variable proxied by firm age, firm size, sales growth, liquidity and leverage.

A company's profitability is the extent to which its total income exceeds its total expenses for any given period. Profitability is an accounting concept that is sometimes referred to as net profit or net income.

Profitability primarily indicates to what extent a company is able to produce and sell its goods in the market place for a profit. Broadly, it is a reflection of how well a company renders a product and/or service and to what degree it is able to generate sales.