Increased use of third-party logistics (3PL) services is likely to have which of the following effects on a firm’s balance sheet?

Increased use of third-party logistics (3PL) services is likely to have which of the following effects on a firm’s balance sheet?
A . Decreased fixed assets
B . Decreased retained earnings
C . Increased accounts receivable
D . Increased intangible assets

View Answer

Answer: A

Explanation:

Third-party logistics (3PL) services are services that involve outsourcing some or all of the logistics functions of a firm, such as transportation, warehousing, distribution, or order fulfillment, to an external provider1. By using 3PL services, a firm can reduce its need to own and operate its own logistics assets, such as trucks, trailers, warehouses, or inventory management systems. These assets are classified as fixed assets on the balance sheet, because they are long-term and tangible assets that are used in the normal course of business2. Therefore, increased use of 3PL services is likely to have the effect of decreasing the fixed assets on a firm’s balance sheet.

The other options are not likely effects of increased use of 3PL services on a firm’s balance sheet. Retained earnings are the accumulated net income of a firm that is not distributed to shareholders as dividends3. Retained earnings are not directly affected by the use of 3PL services, unless the firm’s net income changes as a result of cost savings or revenue growth from outsourcing logistics functions. Accounts receivable are the amounts owed to a firm by its customers for goods or services delivered on credit4. Accounts receivable are not directly affected by the use of 3PL services, unless the firm’s sales volume or credit terms change as a result of improved customer service or delivery performance from outsourcing logistics functions. Intangible assets are non-physical assets that have value based on their intellectual or legal rights, such as patents, trademarks, goodwill, or brand names5. Intangible assets are not directly affected by the use of 3PL services, unless the firm’s reputation or market position changes as a result of enhanced quality or innovation from outsourcing logistics functions.

Reference: What Is Third Party Logistics (3PL) ? | Definition, Types, Benefits

Fixed Asset – Definition & Examples (Assets = Liabilities + Equity)

Retained Earnings – Definition & Formula

Accounts Receivable – Overview, Examples & Importance Intangible Asset – Definition & Examples