Question

The purchase spend – sales ratio (provide reasoning for answer):

a. Is higher in the manufacturing industry compared to the banking sector

b. Is the same in the service sector and in the financial sector

c. Is higher in the banking sector compared to the manufacturing industry

d. Is the same in the financial sector and in the manufacturing industry

Answer 1

In manufacturing, the expenses into investing into the raw materials and converting the same into finished goods for sales, is considerable. However, the expenses need to be lesser than the sales because only then, would the industry survive. However, with regards to the service sector, banking and financial fields also form a part of it wherein the expenses as such into the raw materials is quite small and only pertaining to the processing of the services. Hence, the purchase spend-sales ratio cannot be more in this industry as compared to that of the manufacturing one. This shall also include the aspect of banking and financial sectors. It may only remain the same. If the manufacturing sector has higher purchase spend-sales ratio as compared to the banking sector, then it is at stake. Hence, it could be only concluded from the above options that the purchase spend-sales ratio is same in the service sector and in the financial sector.