A company's annual report states that its net profit increased by 10% from last year, while its revenue increased by 8%. Additionally, its operating expenses remained flat. Based on this information, what is the most likely reason for the disproportionate increase in net profit relative to revenue?

The correct answer to the question "A company's annual report states that its net profit increased by 10% from last year, while its revenue increased by 8%. Additionally, its operating expenses remained flat. Based on this information, what is the most likely reason for the disproportionate increase in net profit relative to revenue?" is Option A: The company reduced its cost of goods sold (COGS) as a percentage of revenue..

The other options — B) The company increased its marketing expenditure., C) The company acquired a competitor, boosting revenue significantly., D) The company paid higher taxes this year. — are incorrect for this GMAT Exam Prep question. As explained above: If operating expenses are flat and revenue increased, a higher profit growth implies that another cost component (like COGS) must have decreased relative to revenue, thus improving the profit margin.