The table below shows the financial performance of five companies

Question

The table below shows the financial performance of five companies (A, B, C, D, and E) over three years. It includes revenue (in millions of dollars), profit margin (as a percentage), and the number of employees.

Company 
 2021   Revenue 
 2021   Profit   Margin 
 2021   Employees 
 2022   Revenue 
 2022   Profit   Margin 
 2022   Employees 
 2023   Revenue 
 2023   Profit   Margin 
 2023   Employees 
 
  A 
 500 
 10% 
 1,000 
 550 
 12% 
 1,050 
 600 
 15% 
 1,100 
 
  B 
 300 
 8% 
 800 
 320 
 9% 
 820 
 350 
 10% 
 850 
 
  C 
 700 
 15% 
 1,200 
 750 
 14% 
 1,250 
 800 
 13% 
 1,300 
 
  D 
 400 
 12% 
 900 
 420 
 11% 
 950 
 450 
 10% 
 1,000 
 
  E 
 600 
 20% 
 1,100 
 650 
 18% 
 1,150 
 700 
 16% 
 1,200

For each of the following statements, select  True  if the statement can be verified to be true based on the information provided. Otherwise, select  False .

Bunuel · Accepted Answer

Official Solution:

Statement 1: 
 
Profit = Revenue * Profit Margin. Observe that we don’t need to calculate the profit for all companies in all years. By quickly glancing through the numbers, we can identify which companies could potentially have the highest profit based on their high revenue and high profit margin. This allows us to save time by focusing only on the most likely candidates.
 
In this case, Company C and Company E stand out as having both high revenue and high profit margins. Calculating these confirms that E had the highest profits in all three years. Thus, this statement is True.
 
 Statement 2: 
 
To evaluate this statement, check Company C's profit margin trends over the three years:
 
2021: 15% → 2022: 14% → 2023: 13%.
 
The profit margin consistently decreased each year. Thus, this statement is True.
 
 Statement 3: 
 
In 2021, the company with the fewest employees was Company B (800 employees). Additionally, Company B had the lowest revenue ($300M) among all companies in the same year. Since both conditions are satisfied, this statement is True.

Correct answer:

Company E had the highest revenue in all three years.  "True"

Company C's profit margin decreased every year from 2021 to 2023.  "True"

The company with the fewest employees in 2021 had the lowest revenue.  "True"

Bismuth83 · Answer

1. The question asks us to  figure out whether the following statements are true or false.

2.  Company E had the highest profit in all three years. Profit is revenue multiplied by profit margin.  Companies A, B, and D have less revenue and profit margin than company E for all 3 years. Let's compare company E's profit with company C's profit across 2021 to 2023.

- 2021. Company E:  600 * 20\% = 120 . Company C:  700 * 15\% = 105 . 120 > 105.
- 2022. Company E:  650 * 18\% = 117 . Company C:  750 * 14\% = 105 . 117 > 105.
- 2023. Company E:  700 * 16\% = 112 . Company C:  800 * 13\% = 104 . 112 > 104.

So, this statement is true.

3.  Company C's profit margin decreased every year from 2021 to 2023.  The company's profit margins for years 2021, 2022, and 2023 are 15%, 14%, and 13%, respectively. This is strictly decreasing.   So, this statement is true.
  
4.  The company with the fewest employees in 2021 had the lowest revenue.  Company B had the fewest employees in 2021, 800, and had the lowest revenue - 300.   So, this statement is true.

Aalto700 · Answer

I made a mistake of calculating profit margin  in USD , in question 2. I should read the defination of profitmargin which provided in the question.

Varun0902 · Answer

same , how would you identify if we need to calculate in USD or not

egmat · Answer

Hi Varun0902,

You're picking up on Aalto700's note about accidentally working in USD on Statement 2, so let me show you the exact cue that tells you which one to use.

The trick is to read  two things together : the  word in the statement  and the  column header that defines its units .

The header tells you up front:
-  Revenue  - "in millions of  dollars " - a dollar amount.
-  Profit margin  - "as a  percentage " - already a percent, nothing to convert.

Now match each statement to the right one:

-  Statement 2  asks whether Company C's  profit margin  decreased. "Profit margin"  is  the percentage column, so you just read it straight down:  15% - 14% - 13% . No dollars, no multiplying. That's exactly where Aalto700 slipped - converting a value that was already a percentage.
-  Statement 1  asks about  profit  - the actual dollar amount, which the table does  not  list. To get a dollar figure you must combine the two columns: Profit = Revenue x Profit Margin. For Company E in  2021  that's  600  x  20%  =  120 .

So the rule of thumb:  if the statement names a quantity the table gives directly (a column that exists), read it as-is. If it names a quantity that isn't its own column, you have to compute it - and the units in the headers tell you what kind of number you're building.

Quick rehearsal

Say a row reads Revenue  = 400 , Profit Margin  = 10% .
- Asked about "profit margin"? Answer is  10%  - done.
- Asked about "profit"? Build it:  400  x  10%  =  40  (million dollars).

Same word-check every time: is the thing asked for already a column, or do I have to make it?

JAIDEEP27 · Answer

Hi everyone,

I have a doubt regarding this question:

https://gmatclub.com/forum/the-table-be ... 40805.html

The official solution calculates:

Profit = Revenue × Profit Margin

My confusion is that I have always learned:

Profit % = (Selling Price − Cost Price) / Cost Price × 100

Using that definition, profit is calculated with respect to cost price, not revenue.

So I have two questions:

Is the term "profit margin" on the GMAT always interpreted as:

Profit Margin=
Revenue
Profit

unless the question explicitly states otherwise?

Or is this specific to this question because the table provides Revenue and Profit Margin, making the above interpretation the only valid one?

I want to make sure I use the correct convention on future GMAT DI questions and don't confuse profit percentage (on cost) with profit margin (on revenue).

Thanks!

SKP220292 · Answer

Bunuel   GMATNinja  For statement 2, we are asked whether profit margin has decreased? Doesn't that suggest whether profit margin in absolute terms has decreased? Which it has not from 2021 to 2022 - stayed at 105 for both years

There are plenty of questions where we are asked to not read profit decrease as the same as profit % decrease. So how come here we can assume that we are being asked to check whether the profit margin percent has decreased and not absolute profit margin?

egmat  request you to NOT reply.

The table below shows the financial performance of five companies

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Company	2021 Revenue	2021 Profit Margin	2021 Employees	2022 Revenue	2022 Profit Margin	2022 Employees	2023 Revenue	2023 Profit Margin	2023 Employees
A	500	10%	1,000	550	12%	1,050	600	15%	1,100
B	300	8%	800	320	9%	820	350	10%	850
C	700	15%	1,200	750	14%	1,250	800	13%	1,300
D	400	12%	900	420	11%	950	450	10%	1,000
E	600	20%	1,100	650	18%	1,150	700	16%	1,200

True	False
		Company E had the highest profit in all three years.
		Company C's profit margin decreased every year from 2021 to 2023.
		The company with the fewest employees in 2021 had the lowest revenue.

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The table below shows the financial performance of five companies

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