Firms Work to Diversify

question 20

Multiple Choice

Firms work to diversify. Which of the following is not a diversification method that firms use?

• A) Firms seek to expand the customer base.
• B) Firms seek to obtain raw materials from several suppliers.
• C) Firms seek to isolate their product by selling to a single niche market.
• D) Firms seek to produce more than one product.

---

Definitions:

Capital Budgeting

The process of allocating resources for significant capital, or investment, expenditures in the long term.

Discount Factor

A multiplier used in discounted cash flow (DCF) analysis to calculate the present value of future cash flows.

Profitability Index

A calculation that compares the present value of future cash flows to the initial investment, used in capital budgeting to determine the desirability of an investment.

Investment Projects

Projects undertaken by individuals or companies involving the investment of capital for future gain.