Synergy Exists When

question 3

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:

LIFO

The Last In, First Out approach to inventory valuation prioritizes the sale of the most recently manufactured items before older stock.

Tax Advantage

A tax advantage refers to the economic bonus that applies to certain accounts or investments that are exempt from taxation, or taxed at a lower rate.

Rising Prices

A situation where the general level of prices for goods and services increases over a period, indicative of inflation.

LIFO Liquidation

The process of reducing inventory using the Last-In, First-Out (LIFO) method, which can impact the cost of goods sold and taxes during times of inflation.