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In general terms it is a true statement. The higher the operating leverage, the greater the potential danger for a forecasting error. As such, entering long lasting contracts with suppliers, especially key suppliers, is a way to reduce risk since there is a share of responsibility if operations do not perform as expected.
Moreover, entering into long term contracts, a firm may benefit from a supplier by having better pricing, improved payment terms, more accurate deliveries of raw materials and superior treatment as a customer.
agree with the answers ..................................................
agree with expert answers above
True as long as there is sufficient future demand at current prices.
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