Which of the Following Statements Is True About How the Portfolio

question 77

Multiple Choice

Which of the following statements is true about how the portfolio strategy can be used to help managers acquire companies that fit well with the rest of their corporate portfolio?

• A) The fewer businesses in which a corporation competes, the smaller its overall chances of failing.
• B) Risk can be reduced through related diversification (creating or acquiring companies in related businesses).
• C) Invest the profits and cash from mature, slow-growth businesses into newer, faster growing businesses.
• D) The most significant advantage of the portfolio strategy is the ability to categorize businesses as stars, exclamation points, question marks, and dogs.
• E) All of these statements about how the portfolio strategy can be used to help managers acquire companies that fit well with the rest of their corporate portfolio are true.

---

Definitions:

Monopolists

Entities that are the sole providers of a product or service in a market, allowing them to control prices and output levels.

Profit-Maximizing Output

The production level at which a business attains its greatest possible earnings.

Higher Prices

A situation where the cost of goods or services increases, often due to factors such as inflation, increased demand, or higher production costs.

Monopolists

Single sellers in a market who have significant control over the price and supply of a particular product or service.