CH03 TB

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 ___________ and ___________ percent.
a. 5; 10
b. 4; 8
c. 3; 6
d. 2; 4
[LO: material at beginning of the chapter; Moderate; Application; AACSB Category 3:

Analytical thinking]
2. Which of the following is not a level at which strategy can be formulated?
a. corporate
b. business unit
c. functional
d. individual location
[LO 3.1: To understand how logistics decisions can influence an organization’s strategic
financial outcomes; Moderate; Synthesis; AACSB Category 3: Analytical thinking]
3. ___________ 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.
a. Functional level
b. Business unit level
c. Divisional level
d. Corporate level
financial outcomes; Easy; Concept; AACSB Category 3: Analytical thinking]
4. Strategy at a ___________ 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.
a. functional
b. business unit
c. divisional
d. corporate
1
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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?
a. value enhancement
b. differentiation
c. cost leadership
d. focus
6. A ___________ 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.
a. focus
b. differentiation
c. value enhancement
d. market orientation
7. Which generic strategy concentrates an organization’s effort on a narrowly defined market to

achieve either a cost leadership or differentiation strategy?
a. hybrid
b. market orientation
c. tailored
d. focus
8. A(n) ___________ entails the functional units of an organization providing input into the
other levels of strategy formulation.
a. supply chain
b. differentiation strategy
c. hierarchy of strategy
d. enterprise resource system
2
financial outcomes; Moderate; Concept; AACSB Category 3: Analytical thinking]
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)?
a. corporatebusiness unitfunctional
b. functionalbusiness unitcorporate
c. corporatebusiness unitdivisional
d. business unitdivisionalfunctional
financial outcomes; Difficult; Synthesis; AACSB Category 3: Analytical thinking]
10. ___________ strategy decisions involve issues such as the number and location of
warehouses and the selection of appropriate transportation modes.
a. Marketing
b. Production
c. Finance
d. Logistics
financial outcomes; Moderate; Application; AACSB Category 3: Analytical thinking]
11. Which of the following is not a potential type of logistics strategy decision?
a. investments in technology that support logistics activities

b. selection of appropriate transportation modes
c. deployment of inventory
d. product availability
12. When developing logistics strategy, a(n) ___________ strategy refers to the management of
logistics activities with a focus on costs.
a. market
b. process
c. differentiation
d. information
3
13. A(n) ___________ strategy refers to management of logistical activities with a goal of
achieving coordination and collaboration through the channel.
a. market
b. process
c. differentiation
d. information
14. A(n) ___________ 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.
a. value co-creation
b. omnichannel
c. hybrid logistics
d. information-centric
15. The ___________ shows revenues, expenses, and profit for a period of time.
a. balance sheet
b. current ratio
c. income statement
d. statement of cash flows
[LO 3.2: To review basic financial terminology used by logistics managers; Easy; Concept;
AACSB Category 3: Analytical thinking]
16. In general, the ___________ measures the profitability of the products and/or services
provided by a company.
a. balance sheet
b. Strategic Profit Model (SPM)
c. Balanced Scorecard (BSC)
d. income statement
[LO 3.2: To review basic financial terminology used by logistics managers; East; Application;
17. The ___________ reflects the assets, liabilities, and owners’ equity at a given point in time.
a. Balanced Scorecard (BSC)
4
b. balance sheet
c. income statement
d. Strategic Profit Model (SPM)
18. The balance sheet reflects the assets, liabilities, and ___________ at a given point in time.
a. costs of goods sold

b. net income
c. owners’ equity
d. asset turnover
19. Which of the following does not appear on the balance sheet?
a. assets
b. owners’ equity
c. liabilities
d. net income
[LO 3.2: To review basic financial terminology used by logistics managers; Moderate;
Synthesis; AACSB Category 3: Analytical thinking]
20. Which of the following does not affect cash flows within an organization?
a. revenue growth
b. asset utilization
c. inventory
d. accounts receivable
Synthesis; AACSB Category 3: Analytical thinking]
21. The ___________ Act has implications for logistics managers in terms of internal controls,
off balance sheet obligations, and timely reporting of material events.
a. Glass-Steagall
b. Financial Managers
c. Sarbanes-Oxley
d. Regulatory Accountability
5
[LO 3.3: To explain organizational financial reporting requirements affected by logistics
activities; Moderate; Application; AACSB Category 3: Analytical thinking]
22. 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
[LO 3.4: To employ the strategic profit model to highlight the financial impact of logistics
23. Which of the following is a common measure of organizational financial success?
a. Net profit margin

b. Income statement
c. Current ratio
d. Return on Investment (ROI)
activities; Moderate; Synthesis; AACSB Category 3: Analytical thinking]
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?

c. Balance Sheet
d. Supply Chain Operations Reference Model
activities; Moderate; Concept; AACSB Category 3: Analytical thinking]
25. Return on assets (ROA) 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.
d. total assets divided by costs of goods sold.
6
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)?
a. Both inventory turnover and ROA increase.

b. Inventory turnover increases and ROA decreases.
c. Inventory turnover decreases and ROA increases.
d. Both inventory turnover and ROA decrease.
activities; Difficult; Synthesis; AACSB Category 3: Analytical thinking]
27. 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
28. With respect to net profit margin, the most relevant categories for logistics managers to
consider are:
a. sales, costs of goods sold, and asset turnover.

b. accounts receivable, costs of goods sold, and total expenses.
c. sales, costs of goods sold, and total expenses.
d. inventory, accounts receivable, and total expenses.
29. What is the formula for asset turnover?
a. total sales divided by total assets

b. net profit divided by total assets
c. return on assets divided by total assets
d. return on investment divided by return on net worth
30. With respect to asset turnover, ___________ is typically the most relevant logistics asset.
a. warehousing
7
b. inventory
c. transportation equipment
d. materials handling equipment
31. The Balanced Scorecard (BSC) approach is based on the belief that management should
evaluate their business from ___________ distinct perspectives.
a. two
b. three
c. four
d. five
[LO 3.5: To consider the value of utilizing the Balanced Scorecard approach for examining the
performance of a logistics system; Moderate; Concept; AACSB Category 3: Analytical
thinking]
32. The ___________ is based on the belief that management should evaluate their business
from four different perspectives.

c. Boston Consulting Group Matrix
d. Gross Margin Return on Inventory
performance of a logistics system; Moderate; Concept; AACSB Category 3: Analytical
thinking]
33. Logistics measurement systems have been traditionally designed to include information on
how many types of performance?
a. two
b. three
c. four
d. five
[LO 3.6: To compare some of the common performance measures for logistics activities;
Moderate; Synthesis; AACSB Category 3: Analytical thinking]
34. Performance measurement in ___________ is used to identify design and operations options
that provide benefits in terms of increased speed or reduced costs.
a. materials handling
8
b. warehousing
c. packaging
d. order management
Moderate; Application; AACSB Category 3: Analytical thinking]
35. ___________ looks at how long an organization’s cash is tied up in receivables, payables,
and inventory.
a. Cash-to-cash cycle
b. Cash flow
c. Gross margin return on investment (GMROI)
d. Current ratio
Moderate; Concept; AACSB Category 3: Analytical thinking]
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)
financial outcomes; Easy; Application; AACSB Category 3: Analytical thinking]
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)
9
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)
10
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)
Application; AACSB category 3: Analytical thinking]
15. The income statement is the same thing as the balance sheet. (False)
Application; AACSB category 3: Analytical thinking]
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)
Application; AACSB Category 3: Analytical thinking]
18. The balance sheet reflects the assets, liabilities, and costs of goods sold at a given point in
time. (False)
AACSB category 3: Analytical thinking]
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)
11
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)
Application; AACSB Category 3: Analytical thinking]
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)
[LO 3.3: To explain organizational financial reporting requirements affected by logistics

24. The current ratio is calculated by dividing total current liabilities by total current assets.
(False)
activities; Easy; Concept; AACSB Category 3: Analytical thinking]
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)
12
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)
performance of a logistics system; Moderate; Application; AACSB Category 3: Analytical
thinking]
13
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)
performance of a logistics system; Moderate; Application; AACSB Category 3: Analytical
thinking]
37. The measures associated with the Balanced Scorecard (BSC) can be at a strategic or
tactical level. (True)
performance of a logistics system; Moderate; Synthesis; AACSB Category 3: Analytical
thinking]
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)
Moderate; Concept; AACSB Category 3: Analytical thinking]
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)
14

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TEST BANK

CHAPTER 3: STRATEGIC AND FINANCIAL LOGISTICS

Multiple Choice Questions (correct answers are bolded)

[LO: material at beginning of the chapter; Moderate; Application; AACSB Category 3:

2. Which of the following is not a level at which strategy can be formulated?

6. A ___________ strategy entails an organization developing a product and/or service that

7. Which generic strategy concentrates an organization’s effort on a narrowly defined market to

a. investments in technology that support logistics activities

a. Balanced Scorecard (BSC)

a. costs of goods sold

22. The current ratio is calculated by dividing ___________ by ___________.

a. total current assets; total current liabilities

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

a. Net profit margin

a. Balanced Scorecard (BSC)

25. Return on assets (ROA) equals:

a. current assets divided by total assets.

a. Both inventory turnover and ROA increase.

27. What is the formula for net profit margin?

a. Gross Profit minus Interest Expenses

a. sales, costs of goods sold, and asset turnover.

29. What is the formula for asset turnover?

a. total sales divided by total assets

a. Balanced Scorecard (BSC)

[LO: material at beginning of the chapter; Moderate; Application; AACSB Category 3:

2. Developing financial fluency is a critical skill for contemporary logistics managers.

[LO: material at beginning of the chapter; Moderate; Application; AACSB Category 3:

7. A differentiation strategy entails an organization developing a product and/or service that

14. An understanding of financial terminology can help logisticians to manage logistical

[LO 3.3: To explain organizational financial reporting requirements affected by logistics

25. A common measure of organizational financial success is return on investment (ROI).

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22. The current ratio is calculated by dividing _ by _.