Firms Following an Unrelated Diversification Strategy Can Reduce Their Overall

question 47

Multiple Choice

Firms following an unrelated diversification strategy can reduce their overall risk when:

• A) resources are allocated among many businesses with different risk profiles.
• B) they limit their growth to acquiring only successful companies.
• C) synergies are developed among the business units.
• D) management refuses to purchase businesses outside their sphere of expertise or knowledge.

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Definitions:

Balance Sheet

A report detailing a corporation's assets, liabilities, and equity of shareholders at a certain moment.

Statement Of Owner's Equity

A financial statement that shows the changes in the equity of a company over a specific period, including contributions, withdrawals, and the company’s net income or loss.

Net Income

The amount of profit left after all operating expenses, interest, taxes, and preferred stock dividends have been deducted from total revenues.

Additional Investment

Funds invested into a business by its owners or shareholders over and above the initial investment.