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Basic Question 3 of 4
Here is the common size analysis of company A and B.
Net sales: | 100% | 100%
COGS: | 60% | 55%
SG&A: | 20% | 25%
Depreciation: | 5% | 5%
EBIT: | 15% | 15%
B. Company B.
C. The impact will be the same for both companies.
| Company A | Company B
Net sales: | 100% | 100%
COGS: | 60% | 55%
SG&A: | 20% | 25%
Depreciation: | 5% | 5%
EBIT: | 15% | 15%
Assume there is an inflation of 10% for raw materials. The companies cannot pass on the increase through higher prices. Which company will experience more negative effect caused by the inflation?
A. Company A.
B. Company B.
C. The impact will be the same for both companies.
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Learning Outcome Statements
explain how to forecast industry and company sales and costs when they are subject to price inflation or deflation
CFA® 2025 Level I Curriculum, Volume 3, Module 12.