What Diversification Benefit Argument Is Countered with Lamont's Study Indicating

question 10

Multiple Choice

What diversification benefit argument is countered with Lamont's study indicating that oil firm investments in their nonoil subsidiaries fell sharply after oil price drops in the 1980s?

• A)Use of internal capital markets
• B)Economies of scale and scope
• C)Economizing on transaction costs
• D)Diversifying shareholder portfolios
• E)Identifying undervalued firms

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Definitions:

Operating Expense

This refers to the costs associated with the normal day-to-day operations of a business, excluding costs directly related to product manufacturing or service delivery.

Merchandising Company

A business entity that purchases and sells tangible goods without significantly altering their form.

Terms 2/10, n/30

Payment terms indicating a 2% discount if the bill is paid within 10 days; otherwise, the net amount is due in 30 days.

Discount

A reduction from the usual cost of something, or an amount deducted from the regular price or interest rate.