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Mr. Cuomo is considering two internet retailers for his investment. He is a conservative person and is concerned about the impact of the change of future sales on the profitability of the two retailers. However, the future sales of the two retailers are influenced by market and economic factors and are difficult to predict. Two internet retailers have the following financial data this period (in Millions): ILoveShopping.com All-Online.com Sales $120$186 Variable costs 70150 Fixed costs 3024 Net income $20$12 Which of the statements is TRUE?

Question

Mr. Cuomo is considering two internet retailers for his investment. He is a conservative person and is concerned about the impact of the change of future sales on the profitability of the two retailers. However, the future sales of the two retailers are influenced by market and economic factors and are difficult to predict. Two internet retailers have the following financial data this period (in Millions): ILoveShopping.com All-Online.com Sales 120120186 Variable costs 70150 Fixed costs 3024 Net income 202012 Which of the statements is TRUE?

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Solution

The statement that is true based on the given financial data is that ILoveShopping.com has a higher net income than All-Online.com. Here's the step-by-step calculation:

  1. For ILoveShopping.com, the net income is calculated as follows: Sales - Variable costs - Fixed costs = Net income. So, 120million120 million - 70 million - 30million=30 million = 20 million.

  2. For All-Online.com, the net income is calculated in the same way: 186million186 million - 150 million - 24million=24 million = 12 million.

Therefore, ILoveShopping.com has a higher net income (20million)comparedtoAllOnline.com(20 million) compared to All-Online.com (12 million).

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