A Firm Can Pass the Better-Off Test in Determining the Viability

question 3

Multiple Choice

 A firm can pass the better-off test in determining the viability of diversification when

• A) the price of the acquired firm is low enough to yield a potential return on investment.
• B) the total competitive advantage is above and beyond what the two businesses could achieve independently.
• C) it acquires extremely high-cost industries.
• D) it spends more time on implementation processes.

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Definitions:

Voting Stock

Shares that give the shareholder the right to vote on matters of corporate policy and the election of the board of directors.

Foreign Corporation

A company that is incorporated under the laws of a country different from the country of its primary operations.

Inventory

The total amount of goods and materials held by a business for the purpose of sale or production, including raw materials, work-in-process, and finished goods.

Consolidated Income Tax Return

A single income tax return filed by a parent company that includes all incomes, deductions, and credits of all members of a corporate group.