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ddd [48]
4 years ago
9

2. A specialty chemical company is considering expanding its operations into Brazil, where five companies dominate the consumpti

on of specialty chemicals. What sort of distribution network should this company utilize?
Business
1 answer:
krek1111 [17]4 years ago
4 0

Answer:

Indirect Distribution Sales Channel

Explanation:

The specialty chemical company has five companies that are the consumers of the specialty chemicals. Therefore, it is a Business to Business transaction between the specialty chemical company and their target business customers.

The company should utilize an indirect distribution network. It can be sales operations only where the chemical is manufactured and being supplied to companies in Brazil. There should be carefully selected distributors who have their locations near the five companies. This network, will reduce lagging time of order delivery and sales efficiency will increase.

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Answer:

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Underthe indirect method, we calculate the cash flow based on the change in working capital:

The inventory, which is an asset will be purchased with cash or cash equivalent. Therefore, an increase on inventory produce a decrease of net cash flow.

If the inventory is purchased on account then, It will increase account payable, which represent an increase on the net cash flow. This generates a net effect of zero, 100,000 for account payable - 100,000 for inventory.

Which is what happens when purchase on account are made.

However, here we are asked for an increase on inventory only. We should simply state that this will represent a decrease in the cash flow for 100,000.

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