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TEST BANK

CHAPTER 3: STRATEGIC AND FINANCIAL LOGISTICS

Multiple Choice Questions (correct answers are bolded)

1. Depending on industry and product type, reverse logistics costs as a percent of revenue can range between 3 and 6 percent.
2. Which of the following is not a level at which strategy can be formulated? individual location
3. Corporate level strategy is focused on determining the goals for the company, the types of businesses in which the company
should compete, and the way the company will be managed.
4. Strategy at a business unit level is primarily focused on the products and services provided to customers and on finding ways
to develop and maintain a sustainable competitive advantage with these customers.
5. Which of the following is not one of the generic strategies that can be pursued by an organization, as identified by strategist
Michael Porter? value enhancement
6. A differentiation strategy entails an organization developing a product and/or service that offers unique attributes that are
valued by customers and that the customer perceives to be distinct from competitor offerings.
7. Which generic strategy concentrates an organization’s effort on a narrowly defined market to achieve either a cost leadership or
differentiation strategy? focus
8. A(n) hierarchy of strategy entails the functional units of an organization providing input into the other levels of strategy
formulation.
9. Which of the following represents the preferred hierarchy of strategy (i.e., from the first strategy to be developed to the last to
be developed)? corporatebusiness unitfunctional
10. Logistics strategy decisions involve issues such as the number and location of warehouses and the selection of appropriate
transportation modes.
11. Which of the following is not a potential type of logistics strategy decision? product availability
12. When developing logistics strategy, a(n) process strategy refers to the management of logistics activities with a focus on
costs.
13. A(n) information strategy refers to management of logistical activities with a goal of achieving coordination and
collaboration through the channel.
14. A(n) omnichannel strategy allows retail customers to order products anywhere, any time, and on any device, while also
allowing them to take delivery when and where they want.
15. The income statement shows revenues, expenses, and profit for a period of time.
16. In general, the income statement measures the profitability of the products and/or services provided by a company.
17. The balance sheet reflects the assets, liabilities, and owners’ equity at a given point in time.
18. The balance sheet reflects the assets, liabilities, and owners’ equity at a given point in time.
19. Which of the following does not appear on the balance sheet? net income
20. Which of the following does not affect cash flows within an organization? asset utilization
21. The Sarbanes-Oxley Act has implications for logistics managers in terms of internal controls, off balance sheet obligations,
and timely reporting of material events.
22. The current ratio is calculated by dividing total current assets by total current liabilities
23. Which of the following is a common measure of organizational financial success? Return on Investment (ROI)
24. What provides the framework for conducting return on assets (ROA) analysis by incorporating revenues and expenses to
generate net profit margin, as well as inclusion of assets to measure asset turnover? Strategic Profit Model (SPM)

25. Return on assets (ROA) equals: net profit margin times asset turnover.
26. 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 (ROA)?
Both inventory turnover and ROA increase.
27. What is the formula for net profit margin? Net Profit divided by Sales
28. With respect to net profit margin, the most relevant categories for logistics managers to consider are: sales, costs of goods
sold, and total expenses.
29. What is the formula for asset turnover?. total sales divided by total assets
30. With respect to asset turnover, inventory is typically the most relevant logistics asset.
31. The Balanced Scorecard (BSC) approach is based on the belief that management should evaluate their business from four
distinct perspectives.
32. The Balanced Scorecard (BSC)is based on the belief that management should evaluate their business from four different
perspectives.
33. Logistics measurement systems have been traditionally designed to include information on how many types of performance?
five

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34. Performance measurement in warehousing _ is used to identify design and operations options that provide benefits in terms
of increased speed or reduced costs.
35. Cash-to-cash cycle looks at how long an organization’s cash is tied up in receivables, payables, and inventory.

True-False Questions

1. Depending on the industry and product type, reverse logistics costs as a percentage of revenues can range between 2 and 4
percent. (False)
2. Developing financial fluency is a critical skill for contemporary logistics managers. (True)
3. Logistics performance is important for achieving competitive advantage for many firms. (True)
4. Strategy can be formulated at a corporate level, a business unit level, and a functional level. (True)
5. Strategy at a business unit level is primarily focused on the types of businesses in which the company should compete and the
way the company should be managed. (False)
6. Strategist Michael Porter identified three generic strategies that can be pursued by an organization—namely, cost leadership,
differentiation, and value enhancement. (False)
7. A differentiation strategy entails an organization developing a product and/or service that offers unique attributes that are
valued by customers and that customers perceive to be distinct from competitor offerings. (True)
8. The hierarchy of strategy entails the functional units of an organization providing input into the other levels of strategy
formulation. (True)
9. Functional level strategies exist in marketing and production, but not in logistics. (False)
10. Marketing goals in areas such as product availability, desired customer service levels, and packaging design have limited
influence on logistics decisions. (False)
11. A process strategy refers to management of logistics activities across business units with a focus on reducing complexity for
customers. (False)
12. Research indicates a positive benefit to aligning functional strategies, such as marketing or logistics, with the overall corporate
strategy. (True)
13. An omnichannel strategy allows retail customers to order products anywhere, any time, and on any device, while also allowing
them to take delivery when and where they want. (True)
14. An understanding of financial terminology can help logisticians to manage logistical activities to improve their company’s
financial performance. (True)
15. The income statement is the same thing as the balance sheet. (False)
16. In general, the income statement measures the profitability of the products and/or service provided by a company. (True)
17. Superior logistics service can have a positive influence on an organization’s financial performance. (True)
18. The balance sheet reflects the assets, liabilities, and costs of goods sold at a given point in time. (False)
19. Long-term assets have a useful life of more than two years. (False)
20. Owners’ equity is the difference between what a company owns and what it owes at any particular point in time. (True)
21. The income statement details how an organization generates cash and where cash is used during a defined period of time.
(False)
22. In terms of the statement of cash flows, the connections between logistics activities and cash flows occur primarily in the
operating and financing areas. (True)
23. Three primary areas where the Sarbanes-Oxley Act (SOX) has implications for logistics managers are internal controls, off
balance sheet obligations, and timely reporting of material events. (True)
24. The current ratio is calculated by dividing total current liabilities by total current assets. (False)
25. A common measure of organizational financial success is return on investment (ROI). (True)
26. Return on assets (ROA) equals net profit margin times asset turnover. (True)
27. The Balanced Scorecard (BSC) provides the framework for conducting return on assets (ROA) analysis by incorporating
revenues and expenses to generate net profit margin, as well as inclusion of assets to measure asset turnover. (False)
28. A reduction in inventory would increase inventory turnover, which means an increase in that organization’s return on assets
(ROA). (True)
29. Operationally, net profit margin is net profit divided by cost of goods sold. (False)
30. With respect to net profit margin, the most relevant categories for logistics managers to consider are sales, costs of goods sold,
and asset turnover. (False)
31. The primary influence of logistics activities on sales would be through the improvement of customer service. (True)
32. Asset turnover is calculated by dividing return on assets by total assets. (False)
33. With respect to asset turnover, inventory is typically the most relevant logistics asset. (True)
34. A decision to invest in an electronic data interchange system that would increase invoice accuracy should result in a lower
amount of accounts receivable. (True)
35. The Balanced Scorecard (BSC) is based on the belief that management should evaluate their business from five different
perspectives. (False)
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36. According to the Balanced Scorecard (BSC) approach, the financial perspective is considered the best indicator of whether or
not logistics strategy is being properly implemented and executed. (False)
37. The measures associated with the Balanced Scorecard (BSC) can be at a strategic or tactical level. (True)
38. Best in Class companies tend to use transportation scorecards less frequently than other companies. (False)
39. The cash-to-cash cycle looks at how long an organization’s cash is tied up in receivables, payables, and inventory. (True)
40. When applying performance measures to logistics activities, determination of the key measures should be tailored to the
individual organization and level of decision making. (True)