Diversification Has the Advantage of

question 35

Multiple Choice

Diversification has the advantage of

• A) reducing expected return.
• B) reducing actual return.
• C) reducing risk.
• D) reducing the profits of insurance companies.

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Definitions:

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Undervalued Target

A company or investment asset that is available for purchase at a price less than its intrinsic value.

Congeneric Merger

A type of acquisition where two companies operate in the same industry but do not offer the same products or services.

Combining Companies

The process of merging or acquiring companies to enhance competitive advantage, expand market share or diversify offerings.