Understanding supplier's mark-up and margin can provide procurement professional a comprehensive insight into supplier's net profits. Is this statement true?
A.
Yes, because supplier's mark-up and margin are two most valuable sources of information to procurement
B.
No, because mark-up and margin inform little about supplier's net profit
C.
No, because margin is enough to tell procurement about supplier's profitability
D.
Yes, because these are two indicators of supplier's future prospect
Mark-up and margin allow supplier to make gross profit. Remember that every supplier operates under different cost structures and some are set up to be most profitable at a particular level of volume, so it is dangerous to assume all suppliers can survive on a lower margin if their volume increases. Intelligent buyers understand that mark-up and margin may define gross profits, but they tell you very little about a supplier's net profits.
LO 2, AC 2.1
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