- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 27. Applications of Financial Statement Analysis
- Subject 1. Evaluating Past Financial Performance
CFA Practice Question
Sales of differentiated products at premium prices would generally be reflected most directly in ______, if all other factors remain equal.
II. higher ROA
III. more expenses
IV. higher ROE
I. higher gross profit margin
II. higher ROA
III. more expenses
IV. higher ROE
Correct Answer: I and III
User Contributed Comments 8
| User | Comment |
|---|---|
| muneeb70 | I understand choice I but not III |
| johnowens | Premium Price = I Differentiated Products = III |
| viannie | premium products command better margin but also require more cost in advertising (expense). Also, differentiated products, need to expense more resources in differentiating your products -> in R&D, niche raw materials that's more expensive etc ... |
| johntan1979 | Agree with viannie. Think of Apple vs Wal-Mart |
| davcer | think about perfect competition and monopolistic competition, in perfect competition there is a perfectly elastic mkt demand so you sell at the mkt price, but in monopolistic competition you can charge higher prices but need to differentiate your products with advertising, marketing, etc etc, thus incurring in more expenses |
| ashish100 | i love you guys. You're my brother (t.thunder) |
| kingirm | Why not iv ? |
| 10425406 | great |