because of his businesss recent success, sam has decided to expand his sams swimming pool cleaning to…

because of his businesss recent success, sam has decided to expand his sams swimming pool cleaning to include another branch. this will add expenses for another office and payroll for five more employees, but sams customer base will stay the same, at least for a while. until sams new branch starts bringing in new customers, how will this change affect sams net profit margin?\na. an added expense of a new branch has nothing to do with sams net profit margin.\nb. since the new branch is adding expenses, sams net profit margin will go down.\nc. since the new branch is adding expenses, sams net profit margin will go up.\nd. since the expense the new branch is adding is negligible, sam should see no change in his net profit margin.

because of his businesss recent success, sam has decided to expand his sams swimming pool cleaning to include another branch. this will add expenses for another office and payroll for five more employees, but sams customer base will stay the same, at least for a while. until sams new branch starts bringing in new customers, how will this change affect sams net profit margin?\na. an added expense of a new branch has nothing to do with sams net profit margin.\nb. since the new branch is adding expenses, sams net profit margin will go down.\nc. since the new branch is adding expenses, sams net profit margin will go up.\nd. since the expense the new branch is adding is negligible, sam should see no change in his net profit margin.

Answer

Brief Explanations:

Net profit margin is calculated as net profit divided by revenue. Adding a new branch with more office expenses and payroll while the customer - base (and thus revenue) remains the same initially increases costs. With increased costs and unchanged revenue, net profit decreases, and since net profit is in the numerator of the net - profit - margin formula, the net profit margin goes down.

Answer:

b. Since the new branch is adding expenses, Sam's net profit margin will go down.