Which of the Following Statements Is True About How the Portfolio

question 77

Multiple Choice

Which of the following statements is true about how the portfolio strategy can be used to help managers acquire companies that fit well with the rest of their corporate portfolio?

• A) The fewer businesses in which a corporation competes, the smaller its overall chances of failing.
• B) Risk can be reduced through related diversification (creating or acquiring companies in related businesses).
• C) Invest the profits and cash from mature, slow-growth businesses into newer, faster growing businesses.
• D) The most significant advantage of the portfolio strategy is the ability to categorize businesses as stars, exclamation points, question marks, and dogs.
• E) All of these statements about how the portfolio strategy can be used to help managers acquire companies that fit well with the rest of their corporate portfolio are true.

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Definitions:

Profit Margin

A financial metric indicating the percentage of revenue that remains as profit after all expenses are deducted.

Income Tax Rate

The percentage at which an individual or corporation is taxed on their income.

Net Income

Net Income is the total profit of a company after all expenses have been deducted from revenues.

Effective Tax Rate

The average rate at which an individual or a corporation is taxed, calculated by dividing the total tax by the taxable income.