Answer
Better decisions in purchasing and managing goods for sale can lead to dramatic percentage increases in net income because these decisions directly impact a company's cost of goods sold (COGS). When a company can source, price, and manage its inventory more efficiently, it reduces the cost of goods sold. As COGS is a major expense on the income statement, even a relatively small reduction in COGS can result in a significant increase in net income. This is why improved inventory and purchasing strategies can lead to substantial improvements in profitability.
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