HW 2 What is the effect of Reducing Acquisition Costs on Profit? (2p)
What is the effect of Increasing Sales (volumes) on Profit? (2p)
Which of the above actions (reducing costs or increasing sales) has a stronger/ bigger effect on Profit? Explain why. (2p)
What is the effect of Reducing Acquisition Costs on ROA? (2p)
What is the effect of Increasing Sales on ROA? (2p)
Which of the above actions (reducing costs or increasing sales) has a stronger/ bigger effect on return? Explain why. (2p)
One paragraph per question is usually sufficient. The use of bullet points could keep you on track. (paper organization and presentation count for 2p). I would recommend to include the actual questions in your homework (to help you stay focused on the topic, and to ensure that you address all the questions).
Try to avoid to …
take a hard approach and try to develop a numerical example (often students forget that the denominator for ROA will change in both scenarios)
create a complicated scenario when cost reduction can result in higher sales or lower quality, etc.
use general true statements about good quality, low price, right quantity
You should stay on point and consider that quality, delivery, efficiency, etc. do not change from one scenario to another