In Making a Decision to Diversify, Managers Should Use Value-Creating

question 85

Multiple Choice

In making a decision to diversify, managers should use value-creating reasons or face the risk that their firms will be acquired and they could lose their jobs.Which of the following is a value-creating reason to diversify?

• A) Economies of scope
• B) Desire for increased compensation
• C) Reduced managerial risk
• D) Low performance

---

Definitions:

Inventories

The raw materials, work-in-process products, and finished goods considered part of a business's assets that are ready or will be ready for sale.

Taxes Payable

Liabilities owed to various governmental entities within the current fiscal period.

Bonds Outstanding

The total amount of bonds that are issued by a corporation or government entity and are currently in the hands of investors.

Leverage Ratio

A financial measurement that compares the amount of a company's debt to its assets, equity, or earnings.