Which Contracts Create Information Distortion That Result in Excess Inventory

question 20

Multiple Choice

Which contracts create information distortion that result in excess inventory in the supply chain and a greater mismatch of supply and demand?

• A) Buyback or returns contract
• B) Revenue-sharing contract
• C) Quantity flexibility contract
• D) A and B only

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Definitions:

Break-Even Point

The level of sales at which total revenues equal total costs, resulting in no profit or loss.

Sales

The total income received from selling goods or services over a specific period of time.

DOL

Degree of Operating Leverage, a ratio that measures how sensitive a company’s operating income is to a change in its sales, indicating the volatility of earnings.

OCF

Operating Cash Flow, which measures the cash generated by a company's regular business operations.