Acquisition Is the Preferred Mode of Diversification for Most Firms

question 23

Multiple Choice

Acquisition is the preferred mode of diversification for most firms because:

• A)The stock market confers with high price/earnings ratios on companies that pursue diversifying acquisitions.
• B)Empirical research shows that diversifying acquisitions typically create significant value for the acquiring firm.
• C)The alternative of acquiring a minority stake does not give the diversifying firms significant decision-making influence over the target firm.
• D)The alternative of setting up a new enterprise in the industry to be entered involves excessive time and risk.