A Company Should Pursue Related Diversification Instead of Unrelated Diversification

question 74

Multiple Choice

A company should pursue related diversification instead of unrelated diversification when the company's:

• A) core skills are applicable to a wide variety of industrial and commercial situations.
• B) core skills are highly specialized and have few applications outside the core business.
• C) top managers are skilled at acquiring and turning around poorly run enterprises.
• D) main objective is to maximize its growth.
• E) free cash flow is high enough that it has funds available for investment.

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Definitions:

Operations Year

The 12-month period used by businesses to measure financial and operational performance, often aligning with the fiscal year but not necessarily the calendar year.

Defined Contribution Plan

A pension plan in which the contributions into the plan are defined but the employee’s pension may vary depending on investment performance.

Annual Pension Benefit

The amount of money an individual receives from a retirement plan each year after retirement.

Installment Note

A debt that requires the borrower to make equal periodic payments to the lender for the term of the note.