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Consider the following financial information provided by a business - HSC - SSCE Business Studies - Question 13 - 2021 - Paper 1
Question 13
Consider the following financial information provided by a business. | Year | Revenue (M$) | Gross Profit (M$) | Net Profit (M$) | |------|--------------|----------... show full transcript
Worked Solution & Example Answer:Consider the following financial information provided by a business - HSC - SSCE Business Studies - Question 13 - 2021 - Paper 1
Step 1
Expenses decreased
Answer
To determine which event must have occurred between Year 1 and Year 2, we analyze the provided financial data.
1. Analyze Net Profit: The net profit remains constant at 30M$ between Year 1 and Year 2.
- Year 1 Net Profit = 30M$
- Year 2 Net Profit = 30M$
2. Analyze Revenue and Gross Profit:
- Year 1 Gross Profit = 80M$ (Revenue - Cost of Goods Sold)
- Year 2 Gross Profit = 60M$
- With a decrease in revenue from 100M, to keep the net profit the same, expenses must have decreased since gross profit dropped, indicating that costs related to sales (Cost of Goods Sold) likely increased or stayed constant.
Conclusion: For the net profit to remain at 30M$ despite the decrease in gross profit, expenses must have decreased.