Question

22.

All else being equal, if inventories increase but profits remain the same, your ROA will _____

a.Stay the same

b.Increase

c.Not enough information to make a determination

d.Decrease

23.

How many units of inventory do we need to hold if we want to maintain a 99.98% customer service level for a product that has a mean demand of 600 and a standard deviation of 60?

a.809

b.1,200

c.600

d.660

34.

The increased volatility of customer demand is leading companies to

a.increase economies of scale

b.cut back the number of product variants offered

c.run leaner

d.be more agile

48.

A SKU has a demand of 5 every day but every 4^TH
is out of stock. What is the SKU’s Item Fill Rate?

a.25%

b.82%

c.50%

d.75%

Answer 1

Answer 22 : ROA stands for Return on Assets and is equal to Net profit / Average Total Assets

The given options are evaluated as follows :

1. Stay the same - An increase in inventory would lead to a rise in the average total assets (denominator) , leading to a decrease in the ROA and hence, this option is rejected .
2. Increase - An increase in inventory would lead to a rise in the average total assets (denominator) , leading to a decrease in the ROA and hence, this option is rejected .
3. Not enough information - There is enough information to make a determination and hence, this option is also rejected .
4. Decrease- An increase in inventory without a change in net profits would lead to a rise in the average total assets (denominator) , leading to a decrease in the ROA and hence, this option is the correct answer .

Conclusion : Option “ D “ represents the correct answer .