Question

You invested $5,000 in the Cog corporation and $5,000 in the Gear corporation. Both of these corporations have $100 million in total assets. The Cog corporation had a net profit of $5 million and the Gear corporation had a net profit of $10 million. You read their annual reports and both companies had established a goal of having a net profit equal to 15% of total assets?(a) Cog is more effective than Gear.

(b) Cog is more efficient than Gear.
(c) Gear is more effective than Cog.
(d) Gear is more efficient than Cog.
(e) Cannot tell without more information.

Answer 1

D) Gear is more efficient than Cog.

Step-by-step explanation:

Both corporations established a very optimistic goal regarding net profits over total assets (15%) but neither of them was able to achieve it. Gear was closest to achieving its goal, its net profits were equal to 10% of its total assets, while Cog's profits represent only 5% of its total assets.

So we can conclude that none of them could effectively achieve its goal, but Gear was closest to doing so, therefore, it was more efficient than Cog.

Answer 2

(d) Gear is more efficient than Cog.

Step-by-step explanation: