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Answer: Company 1 achieved a higher gross profit margin than Company 2.
### Explanation 1. **Option A**: Incorrect. Common-size analysis expresses each line item as a percentage of revenue. Company 1's advertising expense was 7% of revenue (531,020 / 7,586,000), while Company 2's was 8% (755,600 / 9,445,000). Thus, Company 2 allocated a higher percentage to advertising. 2. **Option B**: Incorrect. Although both companies spent the same absolute amount on R&D (¥1,800,000), the percentage of revenue allocated to R&D differed. For Company 1, it was 23.73% (1,800,000 / 7,586,000), and for Company 2, it was 19.06% (1,800,000 / 9,445,000). 3. **Option C**: Correct. Common-size analysis reveals that Company 1's gross profit margin was 55% [(7,586,000 - 3,413,700) / 7,586,000], higher than Company 2's margin of 52% [(9,445,000 - 4,533,600) / 9,445,000]. This indicates better profitability for Company 1. This question tests the ability to evaluate financial performance using common-size income statements, a key skill in financial statement analysis.
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An analyst gathers the following information about two companies (in ¥ thousands): Company 1 Company 2 Revenue 7,586,000 9,445,000 Cost of goods sold 3,413,700 4,533,600 Research and development expense 1,800,000 1,800,000 Advertising expense 531,020 755,600 Based on the common-size income statements, which of the following statements is most accurate?
A
Company 1 allocated a higher percentage of revenue to advertising expenses than Company 2.
B
Both companies allocated the same percentage of revenue to research and development expenses.
C
Company 1 achieved a higher gross profit margin than Company 2.