Which of the Following Is an Example of Vertical Integration

question 159

Multiple Choice

Which of the following is an example of vertical integration?

• A)A diamond mine starts to market diamond rings.
• B)A hotel chain buys a diamond mine.
• C)A hotel chain adds a level to its organizational structure.
• D)A diamond mine improves its labour/management relations.
• E)A hotel chain restructures so that its regional managers now report to the director of operations.

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Definitions:

Unsystematic Risk

The risk associated with a specific company or industry, which can be reduced through diversification, unlike systematic risk which affects the entire market.

Portfolio Diversification

A strategy for managing risk that involves diversifying a portfolio with a broad range of investments to reduce the effect of the performance of any individual asset.

Security

A financial instrument that represents ownership (stocks), a creditor relationship (bonds), or rights to ownership (options) that can be bought and sold.

Expected Return

The weighted average of the probable returns of an investment, considering all possible outcomes and their likelihoods.