Certification in Supplier Diversity Practice Exam

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What is a cost benefit analysis primarily concerned with?

A determination of the most profitable suppliers
An examination of both cost and benefits of alternative courses of action
A review of organization-wide supplier performance
An evaluation of supplier relationships

The correct answer is: An examination of both cost and benefits of alternative courses of action

A cost benefit analysis is fundamentally focused on evaluating both the costs and benefits associated with different alternative courses of action. This analytical process helps organizations determine the most advantageous choices by comparing the expected costs against the potential benefits of various options. By assessing these two critical components, businesses can make informed decisions that align with their financial and strategic objectives. This approach is particularly useful in supplier diversity initiatives, where organizations must consider not only the financial implications of engaging with diverse suppliers but also the broader benefits of inclusion in terms of innovation, community impact, and reputation. The results from a cost benefit analysis provide valuable insights that support sound decision-making in supplier management and diversification strategies.