Purchasing a profitable supplier increases profits only if
A)You pay equal to the company's discounted future profits
B)You pay higher than the company's discounted future profits
C)You pay lower than the company's discounted future profits
D)None of the above

Question

​Purchasing a profitable supplier increases profits only if
A)​You pay equal to the company's discounted future profits
B)You pay higher than the company's discounted future profits
C)You pay lower than the company's discounted future profits
D)​None of the above

Quizplus · Accepted Answer

If you pay lower than the company's discounted future profits, the acquisition costs will be lower than the expected future earnings of the supplier, resulting in a positive return on investment and increased profits. Paying equal or higher than the discounted future profits would result in no gain or even losses. Therefore, the best choice is to pay lower than the company's discounted future profits.

​Purchasing a Profitable Supplier Increases Profits Only If

Purchasing a Profitable Supplier Increases Profits Only If