The Better-Off Test for Evaluating Whether a Particular Diversification Move

question 32

Multiple Choice

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves assessing whether the move will

• A)make the company better off because it will produce a greater number of core competencies.
• B)make the company better off by improving its balance sheet strength and credit rating.
• C)make the company better off by spreading shareholder risks across a greater number of businesses and industries.
• D)produce a synergistic outcome such that the company's different businesses perform better together than apart and the whole ends up being greater than the sum of the parts.
• E)help each business earn exactly what they were earning before coming under the same corporate umbrella.

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Definitions:

Accommodation

Piagetian concept of adjusting schemes to fit new information and experiences.

Assimilation

Piagetian concept of the incorporation of new information into existing knowledge.

Equilibrium

A state of balance or stability within a system, achieved when opposing forces or influences are equal.

Cognitive Development

The construction of thought processes, including remembering, problem solving, and decision-making, from childhood through adolescence to adulthood.