A Key Consideration in the Holding Company Decision Is

question 6

Multiple Choice

A key consideration in the holding company decision is

• A) the risk from the separate "companies" in the holding company being classed as one company.
• B) the risk-return tradeoff due to the leverage effect.
• C) the greater "distance" between top level and operating management.
• D) the risk of the domino effect if one company in the holding company fails.

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Definitions:

Bowed Outward

A description of a production possibility frontier that demonstrates the increasing opportunity cost of producing one good over another.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing to invest in one option over others.

Rectangles

A four-sided flat shape where every angle is a right angle and opposite sides are parallel and equal in length.

Historical Episode

A significant event or series of events in the past that has a substantial impact on the present or future.