Which of the Following Reasons for Diversification Is Most Likely

question 27

Multiple Choice

Which of the following reasons for diversification is most likely to increase the firm's value?

• A) Increasing managerial compensation
• B) Reducing costs through business restructuring
• C) Taking advantage of changes in tax laws
• D) Conforming to antitrust regulation

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Definitions:

Par Value

The nominal or face value of a bond, share of stock, or other financial instrument, representing the value at which it is issued.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock and often pays dividends.

Cumulative

Refers to the total amount accumulated over a period of time, often used to describe amounts of money or measurements that build up until a specific point is reached.

Par Value

The nominal or face value of a bond, stock, or coupon as stated by the issuer, which may differ from its market value.