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What was a certain company's revenue last year?

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Intern
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Joined: 05 Oct 2009
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Location: Hamamatsu, Japan
Schools: Attending IE Nov 2010
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What was a certain company's revenue last year? [#permalink] New post 20 Oct 2009, 05:51
00:00
A
B
C
D
E

Difficulty:

(N/A)

Question Stats:

100% (01:31) correct 0% (00:00) wrong based on 27 sessions
I recently got this question on GMAT prep software I downloaded from mba.com:

What was a certain company's revenue last year?

(1) Last year gross profit was $4,100
(2) Last year revenue was 50% greater than expenses

My answer was E, but the "correct" answer was C

So, I should probably state my understanding of a P&L statement:
Total Sales/Revenues - COGS = Gross Profit
Gross Profit - Expenses = Net Income

I assumed that you would need to also know COGS, but it appears from the official answer that the GMAT is taking a more simplified approach...?

Can someone point me in the right direction here?
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Re: GMAT approach to Revenue, COGS, Gross/Net Income? [#permalink] New post 20 Oct 2009, 07:10
Profit = Revenue - Charge

both 1 & 2 insuff
but...

1+2 =>

P = 4100
R - 2/3R = 4100 => then R = 12300
Intern
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Joined: 05 Oct 2009
Posts: 33
Location: Hamamatsu, Japan
Schools: Attending IE Nov 2010
WE 1: 11 years int'l work experience
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Kudos [?]: 10 [0], given: 14

Re: GMAT approach to Revenue, COGS, Gross/Net Income? [#permalink] New post 20 Oct 2009, 16:34
Thanks, but I'm not so much interested in an explanation to the problem as much as I am finding out more about GMAT terminology for Income Statements.

Does anyone know if GMAT questions such as this will always assume a more simplified approach of just Rev - Exp = Profit?

I guess I was taken by surprise because this is an entrance test to Business School.
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Re: GMAT approach to Revenue, COGS, Gross/Net Income? [#permalink] New post 20 Oct 2009, 23:32
Actually I read a book which told that this information was assumed.

actually there are not so many information as this one that a test taker should know
you should buy an official book, you will find all of them

regards,
Alex
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Re: GMAT approach to Revenue, COGS, Gross/Net Income? [#permalink] New post 29 Apr 2012, 14:07
I would like to actually answer your concern. GMAT's Gross Profit is not real accounting Gross Profit.

I did a similar question also on GMAT Prep that wanted Gross Profit but in reality, the calculation was Net Profit.

So to clarify, based on the OG and GMAT Prep, forget everything you know in the real business world, for GMAT purposes PROFIT = REVENUE - COST. GROSS PROFIT on the GMAT does not equal Number of ITEMS x Sale price per item. I know this sounds strange because when the question asks you about GROSS Profit, you automatically want to use Accounting terms and then use COGS to subtract and get NET PROFITS. For some strange reason GMAT assumes all PROFIT is the same and it is a net profit type of calculation that you tweak a bit based upon what you think is being asked. I know this isn't a perfect answer but I did come across this post trying to figure out a definitive answer for all scenarios.
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Re: What was a certain company's revenue last year? [#permalink] New post 29 Apr 2012, 22:00
Jones105,
Remember one thing here. Even though GMAT is a test of entry in to a Business school, the level of stuff tested in the exam is "High school" level. "Profit = Revenue - Cost" is the funda taught in that level and I guess, GMAC won't expect more than that at least for GMAT. I hope I am clear.
_________________

Ravi Sankar Vemuri

Re: What was a certain company's revenue last year?   [#permalink] 29 Apr 2012, 22:00
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