Series 79 practice questionmediumCompetitive Positioning
A company has a lower gross margin than its industry peers, but similar EBITDA margin. What does this MOST likely indicate about its cost structure?
- AHigher cost of goods sold, but lower operating expenses✓ Correct answer
- BLower cost of goods sold, but higher depreciation
- CHigher interest expense
- DLower SG&A costs, but higher taxes
Explanation
Why A — Higher cost of goods sold, but lower operating expenses
A lower gross margin signals higher COGS, but if EBITDA margin is similar, operating expenses must be lower to compensate. Interest and taxes are excluded from EBITDA and don't explain margin differences here.
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