Question

The strategic profit model is useful to illustrate which of the following?

a) how firms can minimize inventory holdings
b) how inventory management affects overall firm profitability
c) how increased worker compensation would enhance inventory management efficiency
d) that the ROA is calculated as the ratio of net profits and total assets

Answer 1

The Strategic Profit Model highlights the impact of inventory management on a firm's profitability, aiding in strategic financial planning.

Step-by-step explanation:

The Strategic Profit Model is useful to illustrate how inventory management affects overall firm profitability. This model helps in understanding the impact of different business operations on the bottom line. To maximize profits, a firm must carefully gauge its production decisions, integrate cost management with sales and revenue insights, and position itself effectively within the market structure. However, the model does not directly show how minimizing inventory holdings, increasing worker compensation, or the computation of Return on Assets (ROA) might impact profitability.