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:

Interest Payable

A liability account shown on a company’s balance sheet which represents the amount of interest expense that has accrued but has not been paid as of the balance sheet date.

Interest Expense

The financial cost of borrowing money that an entity sustains over time.

Notes Payable

Written promises to pay a specified amount of money, usually including interest, at a future date; classified as liabilities.

Cash

Money in the form of coins or banknotes, especially that which is used to conduct transactions.