Which of the Following Is NOT a Reason for Firms

question 30

Multiple Choice

Which of the following is NOT a reason for firms to participate in strategic alliances?

• A) To enter markets more quickly
• B) To allow firms to combine their resources and capabilities
• C) To allow firms to create values they could not develop acting independently
• D) To develop oligopolies in a market and eliminate competition

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Definitions:

M&M Proposition I

M&M Proposition I, under the Modigliani-Miller theorem, states that in an ideal market, the value of a firm is not affected by how it is financed, whether through debt or equity.

Homemade Leverage

A strategy whereby investors adjust the financial leverage of their investment by borrowing or lending money on their own, rather than relying on the leverage inherent in their investments.

Financial Leverage

The use of borrowed funds (debt) to amplify the potential return on investment.

Personal Borrowing

Personal borrowing involves an individual obtaining funds from a lender (such as a bank or financial institution) for personal use, which could range from purchasing a home to funding education.