Synergy Exists When

question 115

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:

Paid-in Capital

Funds received by a company from selling its stock directly to investors, not including any stock sales on the open market.

Common Stock

A type of security that represents ownership in a corporation, entitling the holder to vote at shareholders' meetings and receive dividends.

No-par Common Stock

Shares issued without a par value, allowing the company more flexibility in setting their price.

Paid-in Capital

The total amount of capital that shareholders have contributed to a company in exchange for shares of stock.