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Denoma, a major consumer-electronics maker, had a sizeable

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New post 23 Sep 2004, 16:50
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Denoma, a major consumer-electronics maker, had a sizeable decline in sales revenue for its most recent fiscal year. This result appears surprising, because electronics retailers report that although their overall sales were considerably lower than in the previous year, their sales revenue from Denoma models actually grew, largely thanks to some innovative and popular models that Denoma introduced.

Which of the following, if true, does most to explain the apparently surprising result?

A. Because of the need to educate the public about its new models’ capabilities, Denoma’s advertising spending was higher than normal over the period.
B. For the period at issue, Denoma’s major competitors reported declines in revenue that were, in percentage terms, greater than Denoma’s.
C. A significant proportion of Denoma’s revenue comes from making components for other consumer-electronics manufacturers.
D. Unlike some of its major competitors, Denoma has no lines of business outside consumer electronics to provide revenue when retail sales of consumer electronics are weak.
E. During the period, consumer-electronics retailers sold remaining units of Denoma’s superseded models at prices that were deeply discounted from those models’ original prices.

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New post 23 Sep 2004, 17:59
Am guessing the answer is E...though B can also be explained in a somewhat roundabout fashion

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New post 23 Sep 2004, 23:59
A. Because of the need to educate the public about its new models’ capabilities, Denoma’s advertising spending was higher than normal over the period.
- But we're not sure if higher than normal meant more than the sales income

B. For the period at issue, Denoma’s major competitors reported declines in revenue that were, in percentage terms, greater than Denoma’s.
- Does not tell us why Denoma suffered a deficit

C. A significant proportion of Denoma’s revenue comes from making components for other consumer-electronics manufacturers.
- Out of scope.

D. Unlike some of its major competitors, Denoma has no lines of business outside consumer electronics to provide revenue when retail sales of consumer electronics are weak.
- Yes, but we're told their consumer electronic products are selling well

E. During the period, consumer-electronics retailers sold remaining units of Denoma’s superseded models at prices that were deeply discounted from those models’ original prices.
- Here's the answer. The superseded models were selling well, but at a massive discount from the original price. If this is the case, it's no surprise sales revenus is down for Denoma. Also, since it's remaining models being sold, there's no sales of new models to retailers from Denoma.

E for me.

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New post 24 Sep 2004, 08:03
OA is E

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