Which of the Following Reasons Encourages Companies to Buy a Product

question 85

Multiple Choice

Which of the following reasons encourages companies to buy a product rather than make it?

• A) Buying a product gives managers greater control over the production process.
• B) Buying a product increases the company's total costs significantly compared to making the product in-house.
• C) Buying a product ensures non-flexibility to local market conditions.
• D) Buying a product enables a company to gain a great deal of power in their relationships with suppliers.

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Definitions:

Profitability Index

The profitability index measures the relationship between the present value of future cash flows and the initial investment.

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor.

Payback Method

An investment appraisal technique that calculates the amount of time required for an investment to generate cash flows sufficient to recover its initial cost.

Cash Inflows

Money or equivalent value received by a business, often from operations, investments, or financing activities.