Which of the Following Reasons Can Make a Diversification Strategy

question 26

Multiple Choice

Which of the following reasons can make a diversification strategy an unwise course of action for a company to pursue?

• A) Steady industry conditions
• B) Varying firm-specific conditions
• C) Diversification for pooling risks
• D) Decreasing bureaucratic costs
• E) Greater differentiation of products

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Definitions:

Net Cash Flow

The difference between a company's cash inflows and outflows within a specified period.

Investing Activities

Financial transactions related to the acquisition or disposal of long-term assets and investments, considered part of the cash flow statement.

Equipment Purchase

The acquisition of machinery or office equipment, usually classified as a capital expense, to be used in the operations of a business.

Land Purchase

An acquisition of real estate property involving a one-time payment or installment payments, considered a long-term asset on the balance sheet.