The Profit-Leverage Effect of Supply Savings Means That

question 3

Multiple Choice

The profit-leverage effect of supply savings means that:

• A) a reduction in money tied up in inventory improves profits.
• B) a reduction in purchase spend increases profit more than an equal sales increase.
• C) effective price negotiations with a supplier will lower the supplier's profits.
• D) the buyer gains leverage over suppliers when purchases are standardized.
• E) efficient and effective supply management processes will increase profits.

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Definitions:

Profits

Financial gains obtained when the revenue from business activities exceeds the expenses, taxes, and costs of operating.

Temporary Difference

A discrepancy between the carrying amount of an asset or liability in the balance sheet and its tax base, creating taxable or deductible amounts in the future.

Straight-Line Depreciation

A technique for distributing the cost of an asset uniformly over its lifespan.

Capital Cost Allowance

Capital Cost Allowance is a tax deduction in some jurisdictions that represents depreciation for tax purposes, allowing businesses to deduct the cost of certain assets over a period.