Does a Firm Need to Diversify Across Different Businesses in Order

question 71

Essay

Does a firm need to diversify across different businesses in order to benefit from economies of scope?

---

Definitions:

Horizontal Analysis

A financial analysis technique that compares historical financial data across several periods to identify trends and growth patterns.

Days' Sales in Inventory

A financial metric calculating the average number of days a company holds inventory before selling it, reflecting inventory management efficiency.

Dividend Yield

The financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Total Asset Turnover

A financial ratio that measures a company’s ability to generate sales from its assets by comparing net sales with average total assets.