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Basic Question 1 of 1

Sales of differentiated products at premium prices would generally be reflected most directly in ______, if all other factors remain equal.

I. higher gross profit margin
II. higher ROA
III. more expenses
IV. higher ROE

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
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Learning Outcome Statements

evaluate a company's past financial performance and explain how a company's strategy is reflected in past financial performance;

CFA® 2024 Level I Curriculum, Volume 3, Module 27.