Which of the Following Is a Disadvantage of Modular Organizations

question 24

Multiple Choice

Which of the following is a disadvantage of modular organizations? 

• A) ​They cost significantly more to run than traditional organizations. 
• B) ​They are characterized by a loss of control that occurs when key business activities are outsourced to other companies. 
• C) ​They do not let companies share costs, and because members cannot combine their efforts to meet customers' needs, they are slow. 
• D) ​They are unstable and have temporary relationships in a network alliance.

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Definitions:

Proportionate Consolidation Method

An accounting technique where an investor reports its share of an investee's assets, liabilities, income, and expenses in proportion to its ownership percentage, without consolidating the financial statements.

Consolidated Balance Sheet

A financial statement that aggregates the assets, liabilities, and equity of a parent company and its subsidiaries into one document.

Goodwill

An intangible asset that arises when a buyer acquires an existing business, representing the premium paid over the fair value of its net assets.

Proportionate Consolidation Method

An accounting technique used for combining the financial statements of joint ventures, where the investor's share of each line item is included proportionally.