Which of the following influences the leverage effect of procurement?
A) The procurement to sales ratio.
B) The capital turnover ratio.
C) The procurement to sales ratio and the capital turnover ratio.
D) Neither the procurement to sales ratio nor the capital turnover ratio.

Question

Which of the following influences the leverage effect of procurement? 
A) The procurement to sales ratio. 
B) The capital turnover ratio. 
C) The procurement to sales ratio and the capital turnover ratio. 
D) Neither the procurement to sales ratio nor the capital turnover ratio.

Quizplus · Accepted Answer

Both the procurement to sales ratio and the capital turnover ratio contribute to the leverage effect of procurement. The procurement to sales ratio measures the proportion of sales that are being spent on procurement, while the capital turnover ratio measures the efficiency with which the company is using its capital. A higher procurement to sales ratio or a lower capital turnover ratio indicates higher leverage due to procurement. Therefore, option C is the correct choice.

Which of the Following Influences the Leverage Effect of Procurement