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.

---

Definitions:

Agent

An individual or entity authorized to act on behalf of another.

Written Agreement

A contract or agreement put in written form and typically signed by all parties involved.

Independent Contractor

An individual or entity contracted to perform work for another entity as a non-employee, under specific terms.

Unusually Hazardous

Activities or conditions that carry an exceptionally high risk of causing harm or damage.