One Limitation of an Unrelated Diversification Strategy Is That Synergies

question 89

True/False

One limitation of an unrelated diversification strategy is that synergies gained from internal financial economies can be matched in all markets, both developed and developing.

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Definitions:

Fixed Cost

Expenses that do not change with the level of production or business activity, such as rent, salaries, and insurance premiums.

Opportunity Rate

The return a company foregoes by investing capital in one project over a potentially more profitable alternative.

Lockbox System

A service provided by banks to companies for the receipt of payment from customers, involving the direct sending of payments to a location accessible by the bank, which then deposits the funds into the company's account.

Present Value

Present value is the current worth of a future sum of money or stream of cash flows, given a specified rate of return.