What could be the correct analysis when profit margin decreases in an enterprise?
Answer and explanation
Correct answer: Costs increased or pricing became weak
Profit margin reflects the profit earned in relation to sales. It can decrease when input, labour, transport, or other operating costs rise, or when the selling price is too low for the value and cost involved. The entrepreneur should compare revenue and cost records, check pricing and efficiency, and investigate changes in product mix. A short name or blaming customers is not financial analysis.
Frequently asked questions
What is the correct answer to this question?
Costs increased or pricing became weak
Why is this the correct answer?
Profit margin reflects the profit earned in relation to sales. It can decrease when input, labour, transport, or other operating costs rise, or when the selling price is too low for the value and cost involved. The entrepreneur should compare revenue and cost records, check pricing and efficiency, and investigate changes in product mix. A short name or blaming customers is not financial analysis.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Sources of Business Finance. Topic: Concept, nature and importance of business finance.
