The Risk for Firms That Follow the Unrelated Diversification Strategy

question 81

Multiple Choice

The risk for firms that follow the unrelated diversification strategy in developed economies is that:

• A) external investors tend to dump the stocks of conglomerates during economic downturns.
• B) conglomerates are typically owned by one powerful entrepreneur and do not survive his/her retirement or death.
• C) government regulations, especially in Europe, have periodically forced the dissolution of conglomerates.
• D) competitors can imitate financial economies more easily than they imitate economies of scope.

Distinguish between direct and indirect costs in various contexts.

Recognize the impact of production level changes on costs and cost behavior.

Prepare and differentiate between traditional and contribution format income statements.

Comprehend the ethical considerations in financial reporting.

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Definitions:

Increasing Efficiency

The process of improving the ability to achieve a higher output with the same or fewer resources, often through the optimization of processes.

Capacity for Change

The ability of an individual or organization to adapt to changes effectively and efficiently.

Organization's Mission

A statement that defines the purpose, aims, and values of an organization, guiding its decisions and actions.

Core Processes

Fundamental business operations and activities that are critical to an organization's success and delivery of its primary value proposition.