SECTION 4

CHAPTER 3: STRATEGIC AND FINANCIAL LOGISTICS

(Continued)

1. What are the key components of the Strategic Profit Model? How can it be used to examine
the effect of logistics decisions?
2. Discuss how logistics decisions affect net profit margin in an organization.
3. Discuss how logistics decisions affect asset turnover in an organization.
4. Discuss some of the ways that inventory costs can be reduced in order to affect an
organizations financial performance.
5. How does logistics strategy connect to overall corporate strategy? Is it a one-way or two-way
connection?
6. Discuss the common logistics measures in transportation, warehousing, and inventory
management.

Multiple Choice Questions

1. The current ratio is calculated by dividing ____ by ____.

a. Total current assets; total current liabilities

b. Total current liabilities; total current assets
c. Total assets; total liabilities
d. Total liabilities; total assets

2. Which of the following is a common measure of organizational financial success?

a. Profitability
b. The income statement
c. Current ratio
d. Return on investment

3. What provides the framework for conducting return on assets analysis by incorporating
revenues and expenses to generate net profit margin, as well as inclusion of assets to measure
asset turnover?

a. The Balanced Scorecard

b. The Strategic Profit Model
c. Microfinancing
d. Supply Chain Operations Reference Model

4. Return on assets equals:

a. Current assets divided by total assets

b. Return on investment divided by return on net worth
c. Net profit margin times asset turnover

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 d. Total assets divided by costs of goods sold

5. Suppose that a logistics manager is able to eliminate some unnecessary inventory, which
reduces the value of current assets as well as total asset value. What is the corresponding
impact on inventory turnover and return on assets?

a. Both inventory turnover and return on assets will increase

b. Inventory turnover increases, while return on assets decreases
c. Inventory turnover decreases, while return on assets increases
d. Both inventory turnover and return on assets will decrease

6. Which of the following is false?

a. The Strategic Profit Model (SPM) can assist the logistics manager in the evaluation
of cash flows and asset utilization decisions
b. The SPM fails to consider the timing of cash flows
c. The SPM is subject to manipulation in the short run
d. The SPM fails to recognize assets that are dedicated to specific relationships
e. All of the above are true

7. What is the formula for net profit margin?

a. Gross profit minus interest expenses

b. Sales divided by costs of goods sold
c. Total sales divided by total assets
d. Net profit divided by sales

8. With respect to net profit margin, the most relevant categories for logistics managers to
consider are:

a. Sales, costs of goods sold, asset turnover

b. Accounts receivable, costs of goods sold, total expenses
c. Sales, costs of goods sold, total expenses
d. Inventory, accounts receivable, total expenses

9. With respect to asset turnover, ____ is typically the most relevant logistics asset.

a. Warehousing
b. Inventory
c. Transportation equipment
d. Materials handling equipment
10. The balanced scorecard approach is based on the belief that management should evaluate
their business from ____ distinct perspectives.

a. Two
b. Three
c. Four
d. Five
e. None of the above

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11. Which of the following is not one of the perspectives evaluated in the balanced scorecard
approach?

a. Customers
b. Internal business processes
c. Learning and growth
d. Financial
e. All of the above are perspectives in the balanced scorecard approach

True-False Questions

1. The current ratio is calculated by dividing total current liabilities by total current assets.

2. A common measure of organizational financial success is return on investment.

3. Return on assets equals net profit margin times asset turnover

4. The balanced scorecard provides the framework for conducting return on assets analysis by
incorporating revenues and expense to generate net profit margin, as well as inclusion of
assets to measure asset turnover.

5. A reduction in inventory would increase inventory turnover, which means an increase in that
organizations return on assets (ROA).

6. Operationally, net profit margin is net profit divided by cost of goods sold.
7. With respect to net profit margin, the most relevant categories for logistics managers to
consider are sales, costs of goods sold, and asset turnover.

8. The primary influence of logistics activities on sales would be through the improvement of
customer service.

9. Asset turnover is computing by dividing return on assets by total assets.

10. With respect to asset turnover, inventory is typically the most relevant logistics asset.

11. A decision to invest in an electronic data interchange (EDI) system that would increase
invoice accuracy should result in a lower amount of accounts receivable.
12. The balanced scorecard is based on the belief that management should evaluate their business
from five different perspectives

13. According to the balanced scorecard approach, the financial perspective is considered the best
indicator of whether or not logistics strategy is being properly implemented and executed.

14. The measures associated with the balanced scorecard can be at a strategic, tactical, or
operational level.

15. With respect to performance measures for logistics, research suggests that measuring
inventory performance is more important than measuring performance in other key logistics
activities such as transportation or warehousing

16. When applying performance measures to logistics activities, determination of the key
measures should be tailored to the individual organization and level of decision making.
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