To Test Whether a Particular Diversification Move Has Good Prospects

question 37

Multiple Choice

To test whether a particular diversification move has good prospects for creating added shareholder value,corporate strategists should use:

• A) the profit test,the competitive strength test,the industry attractiveness test,and the capital gains test.
• B) the better-off test,the competitive advantage test,the profit expectations test,and the shareholder value test.
• C) the barrier-to-entry test,the competitive advantage test,the growth test,and the stock price effect test.
• D) the strategic fit test,the industry attractiveness test,the growth test,the dividend effect test,and the capital gains test.
• E) the attractiveness test,the cost-of-entry test,and the better-off test.

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Definitions:

Late Payment

A situation where a borrower has failed to make loan or debt repayments by the due date, often resulting in penalties.

Absorption Costing

An accounting method that includes all direct and indirect manufacturing costs in the cost of a product.

Fixed Costs

Costs that do not change with the volume of production or sales, such as rent, salaries, and insurance.

Reported Income

The income that a company officially reports on its income statement, which has been calculated according to the applicable accounting standards.