Porter's Three Tests Help to Determine

question 26

Multiple Choice

Porter's three tests help to determine:

• A)What the level of risk is for a potential diversification
• B)Whether diversification would create shareholders' value
• C)If top managers will benefit from diversification
• D)How the financial markets would react to a diversification

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Definitions:

Inventory Turnover

A proportion indicating the frequency at which a company's stock is sold and replenished during a given timeframe.

Gross Profit Rate

A financial metric that indicates the percentage of revenue that exceeds the cost of goods sold, reflecting a company's operational efficiency.

Accounts Receivable Turnover

A financial metric indicating how many times a company collects its average accounts receivable balance in a period.

Price-earnings Ratio

A valuation metric used to measure a company's current share price relative to its per-share earnings.