Synergy Exists When

question 115

Multiple Choice

Synergy exists when:

• A) cost savings are realized through improved allocations of financial resources based on investments inside or outside the firm.
• B) two units create value by utilizing market power in their respective industries.
• C) firms utilize constrained related diversification to build an attractive portfolio of businesses.
• D) the value created by business units working together exceeds the value the units create when working independently.

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Definitions:

Expected Returns

The expected yield from an investment, considering the likelihood of different results.

Positive Variance

The difference between actual performance and expected performance where the actual outcome is more favorable than what was anticipated.

Weights

In finance, it refers to the proportion of each component's value in a portfolio or in a weighted average calculation.

Expected Return

The probable return on an investment, taking into account all possible outcomes or the aggregate return that an investor anticipates over a certain period.