In Making a Decision to Diversify,managers Should Use Value-Creating Reasons

question 40

Multiple Choice

In making a decision to diversify,managers should use value-creating reasons or face the risk that their firms will be acquired and they could lose their jobs. Which of the following is a value-creating reason to diversify?

• A)economies of scope
• B)desire for increased compensation
• C)reduced managerial risk
• D)low performance

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Definitions:

Fixed Costs

Costs that do not change with the amount of goods or services produced, such as rent, salaries, and insurance premiums.

Depreciation

An accounting method of allocating the cost of a tangible asset over its useful life.

Sales Price

The total cost that a consumer incurs to buy a product or service from a merchant.

Fixed Costs

Expenses that do not change with variations in the level of output or sales, such as rent, salaries, and insurance.