Question

how does strategic purchasing decisions influence the Income and Cash Flow Statements?

Answer 1

Strategic purchasing decisions might be purchasing some amount of raw materials or business related assets at an opportunistic low price which might be deviations from the long term contracts laid out. Also, these could be high price purchase made for the sake of delivering on time to a strategic high-value customer.

Thus these decisions are sure to impact the profit & loss as well as the cash flow. In the case of an opportunistic low price purchase, the profit & loss statement is expected to be impacted positively which would also give rise to greater cash flow.

On the other hand, in case of purchase at a higher price in order serve the requirements of a high-value customer, the profits would be reduced and this would imply lesser cash available for the business as well.