Reference no: EM133775712

Question

Northern Services Inc. The Purchasing Policy Guidelines of the Northern Services Inc. indicate that the company is committed to procuring its goods, products, and services from a diversified pool of vendors, contractors, and service providers. Despite these guidelines, Northern's purchasing manager prefers to maintain a small cadre of suppliers that he knows and trusts. How would you expect this situation to affect the assessment of Northern's financial condition and performance? The purchasing manager's behavior should be expected to decrease Northern's riskiness. His belief that the use of trusted suppliers will prevent or eliminate any inventory or supply delays or outages is, no doubt, correct. The purchasing manager's behavior should be expected to increase Northern's riskiness by increasing its exposure to potential supply shortages or mistimed deliveries. Although nonquantitative factors may be relevant to a company's financial evaluation in general terms, the details of this specific situation are not relevant to the firm's financial condition or performance.