An Arrangement Whereby the Firm Owns, or Seeks to Own

question 52

Multiple Choice

An arrangement whereby the firm owns, or seeks to own, multiple stages of a value chain for producing, selling, and delivering a product or service is termed as ________.

• A) vertical integration
• B) horizontal integration
• C) decentralization
• D) centralization

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Definitions:

Net Operating Income

Income from operations after deducting operating expenses but before interest and taxes.

Operating Assets

Assets utilized in the daily operations of a business to generate revenue, such as equipment, machinery, and buildings.

Minimum Required Rate of Return

The lowest acceptable return on an investment, determined by the investor's objectives, risks, and opportunities.

Division's Margin

The difference between the sales generated by a division and its direct costs, used to evaluate the profitability of the division.