Which of the Following Rationales for Pursuing Unrelated Diversification Is

question 43

Multiple Choice

Which of the following rationales for pursuing unrelated diversification is likely to increase shareholder value?

• A) To reduce risk by way of spreading the company's investments over a set of truly diverse industries
• B) To enable a company to achieve rapid or continuous growth
• C) To chance that market downtrends in some of the company's businesses will be partially offset by cyclical upswings in its other businesses
• D) To provide benefits to managers such as high compensation and reduced unemployment risk
• E) To restructure an underperforming business

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Definitions:

Demand Curve

illustrates the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase at various prices.

Marginal Cost

The expense incurred in creating an extra single unit of a product or service.

Price Elasticity

A metric that determines how the demand for a certain good fluctuates with its price adjustments.

Marginal Revenue

The additional income that an organization receives from selling one more unit of a good or service.