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Company A has assets of 100 million and company B has assets of 10 million. Both have the same dollar earnings. Which company is better?

a) Company A
b) Company B
c) Both Equal
d) Not Enough Information

1 Answer

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Final answer:

Without additional information about how effectively the companies use their assets to generate profits or other financial details, we cannot determine which company is better despite the same dollar earnings; therefore, the answer is (d) Not Enough Information.

Step-by-step explanation:

When comparing two companies with the same dollar earnings but different amounts of assets, it is not possible to determine which company is better solely based on this information. This is because other crucial factors need to be considered, such as their return on assets (ROA), cost structure, market share, and growth potential.

Without knowing details such as the cost it takes Company A and Company B to achieve those earnings, or how effectively they are using their assets to generate profits, it is impossible to judge which company is superior. Hence, the answer is (d) Not Enough Information.

For example, Company B, with assets of 10 million, could potentially have a higher ROA than Company A, which has assets of 100 million, indicating more efficient use of its assets. To assist with business-related decision-making, it's essential to have a comprehensive understanding of the company's financial health and operational success, something far beyond merely comparing assets and earnings.

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