Synergy Exists When

question 115

Multiple Choice

Synergy exists when:

• A) cost savings are realized through improved allocations of financial resources based on investments inside or outside the firm.
• B) two units create value by utilizing market power in their respective industries.
• C) firms utilize constrained related diversification to build an attractive portfolio of businesses.
• D) the value created by business units working together exceeds the value the units create when working independently.

---

Definitions:

Net Income

The final earnings of a corporation, calculated by subtracting all operating costs and tax liabilities from its total sales revenue.

Accounts Receivable

Balances owed to a company by its customers for goods or services provided on credit.

Direct Method

A costing method primarily used in cost accounting that allocates service department costs directly to production departments without any intermediate allocations.

Prepaid Expense

Payments made for goods or services to be received in the future, considered as an asset on the balance sheet until used or consumed.