Refer to the "Whopper to Go" article in The Economist. How can Burger King's profitability problems be framed in a linear profit model? (Note: Numbers are not required to frame this problem mathematically.)
- How do linear profit models relate to GAAP-basis income statements?
- How well do linear profit models fit the real world?
- Why might linear cost models be inappropriate? Why might they not be useful?
- Why are linear profit models used in financial decision making?
- What are the limitations of using linear profit models in financial decision making?