Question

4. Company A spends R150 000 on advertising and makes a profit of R1 200 while company B spends R250 000 and makes a profit of R2 000 000. Calculate the ratio of the money spent on advertising to the profit in each.

Ask by Burton Harrington. in South Africa
Jan 23,2025

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Answer

Company A spends R125 on advertising for every R1 of profit, and Company B spends R1 on advertising for every R8 of profit.

Solution

To calculate the ratio of money spent on advertising to the profit for each company, follow these steps: 1. **Determine the ratio for each company:** - **Company A:** - Advertising Spend: R150,000 - Profit: R1,200 - Ratio: \( \frac{150,000}{1,200} = 125 \) - **Ratio:** **125:1** *(This means Company A spends R125 on advertising for every R1 of profit.)* - **Company B:** - Advertising Spend: R250,000 - Profit: R2,000,000 - Ratio: \( \frac{250,000}{2,000,000} = 0.125 \) - **Ratio:** **1:8** *(This means Company B spends R1 on advertising for every R8 of profit.)* 2. **Summary of Ratios:** - **Company A:** 125:1 - **Company B:** 1:8 **Interpretation:** - **Company A** spends significantly more on advertising relative to its profit, indicating a higher advertising cost per unit of profit. - **Company B** has a more efficient advertising spend relative to its profit, spending less on advertising for each unit of profit earned.

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The Deep Dive

For Company A, the ratio of advertising spend to profit can be calculated as R150,000 (advertising) to R1,200 (profit), which simplifies to 125:1. That's pretty high, suggesting they spend a lot for every rand of profit! For Company B, the ratio of advertising spend to profit is R250,000 to R2,000,000, which simplifies to 1:8. This indicates that Company B’s advertising is much more efficient, earning them R8 for every rand spent on ads!

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