In Which of the Following Instances Is Retrenching to a Narrower

question 60

Multiple Choice

In which of the following instances is retrenching to a narrower diversification base NOT likely to be an attractive or advisable strategy for a diversified company?

• A) When a diversified company has struggled to make certain businesses attractively profitable
• B) When a diversified company has too many cash cows
• C) When one or more businesses are cash hogs with questionable long-term potential
• D) When businesses in once-attractive industries have badly deteriorated
• E) When a diversified company has businesses that have little or no strategic or resource fits with the "core" businesses that management wishes to concentrate on

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Definitions:

Dividends

Payments made by a corporation to its shareholder members from the profits or reserves available for distribution, reflecting a share in the company's earnings.

Profit/(Loss)

The financial result of business operations, calculated as revenues minus expenses. A positive figure indicates profit, while a negative figure indicates loss.

General Reserve

Funds set aside out of profits by a company to strengthen the financial position and to meet future unknown liabilities or losses.

NCI Journal

Journal entries related to Non-Controlling Interest, representing the equity in a subsidiary not attributable to the parent company.