Investment Strategies Flashcards
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Read the first 7 Investment Strategies flashcards as text
Which of the following BEST describes an opportunistic purchasing strategy in the context of investment decisions?
Answer: Purchasing in excess quantities when prices are temporarily low
Opportunistic purchasing involves capitalizing on short-term price dips by buying more than immediate need requires.
The internal rate of return (IRR) for a procurement technology investment is MOST useful for:
Answer: Comparing the investment's profitability to the company's hurdle rate
IRR represents the discount rate at which an investment breaks even; comparing it to the hurdle rate determines viability.
A purchasing team decides to invest in a supplier's new production line in exchange for price reductions and capacity reservation. This arrangement is called:
Answer: Collaborative investment or co-investment
Co-investment or collaborative investment involves the buyer sharing capital with a supplier to secure preferential terms and supply access.
When assessing investment risk in a new international supplier, which document provides the MOST direct insight into the supplier's financial stability?
Answer: The supplier's audited financial statements
Audited financial statements reveal liquidity, solvency, and profitability, directly indicating ability to sustain operations.
A company uses a weighted scoring model to evaluate procurement investments. Increasing the weight assigned to 'risk' will MOST likely:
Answer: Penalize investments with high volatility or supplier uncertainty
A higher risk weight causes riskier investment options to score lower in the weighted model, steering decisions toward more stable choices.
Which procurement investment strategy BEST supports environmental sustainability goals while generating long-term cost savings?
Answer: Investing in supplier green technology upgrades
Funding supplier green technology reduces waste, energy costs, and regulatory risk—yielding both sustainability and financial returns.
A buyer evaluates leasing versus purchasing capital equipment for procurement operations. The MAIN advantage of leasing is:
Answer: Preserving capital and transferring obsolescence risk to the lessor
Leasing keeps capital available for other uses and shifts the burden of technological obsolescence to the equipment owner.