Discuss the risks associated with backdoor (maverick) buying and selling, and why is there a need to control this practice? Provide three risks associated with backdoor buying and selling.
Answer
The risk associated with backdoor buying and selling are as
follows-
1. Due to different prices in buying and selling for the same type
of product the cost of product will increase and when price of
product increases the demand automatically decreases, which will
lead to reducing profitability.
2. In back door buying and selling the purchasing policies and
procedures which are established by the firm cannot be followed
constantly.
3. Due to the combination of different prices across the firm, the
firm would find itself in capable of achieving efficiency and
economies of scale will not be achieved.
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