In Making a Decision to Diversify,managers Should Use Value-Creating Reasons

question 40

Multiple Choice

In making a decision to diversify,managers should use value-creating reasons or face the risk that their firms will be acquired and they could lose their jobs. Which of the following is a value-creating reason to diversify?

• A)economies of scope
• B)desire for increased compensation
• C)reduced managerial risk
• D)low performance

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Definitions:

Specified Goods

Items that are explicitly defined or identified in a transaction or contract.

Contract

An agreement based on mutual promises between two or more competent parties to do or to refrain from doing some particular thing that is neither illegal nor impossible. The agreement results in an obligation or a duty that can be enforced in a court of law.

Warranty of Fitness

An assurance that a product or service is suitable for the specific purpose for which it was bought, often implied in sales contracts.

Bicycle Shop

A retail business specializing in the sale, repair, and sometimes rental of bicycles and related accessories and components.