Diversifying into a New Industry by Forming a New Internal

question 43

Multiple Choice

Diversifying into a new industry by forming a new internal subsidiary to enter and compete in the target industry is attractive when:

• A) all of the potential acquisition candidates are losing money.
• B) it is impractical to outsource most of the value chain activities that have to be performed in the target business/industry.
• C) there is ample time to launch the new business from the ground up and entry barriers can be hurdled at acceptable cost.
• D) the company has built up a hoard of cash with which to finance a diversification effort.
• E) none of the companies already in the industry are attractive strategic alliance partners.

Understand the relationship between financial ratios (e.g., P/E ratios) and stock returns.

Recognize the seasonal and cyclical patterns in stock returns and their implications.

Grasp the concept of market efficiency in its various forms and its implications for investment strategy.

Interpret empirical studies on market anomalies and insider trading.

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Definitions:

Subtle Discrimination

Forms of discrimination that are less direct or overt, often embedded in social norms or practices.

Secondary Characteristics

Traits or features that are not primary or essential but still help define or identify something.

Americans With Disabilities Act

A U.S. law passed in 1990 that prohibits discrimination against individuals with disabilities in all areas of public life.

Reasonable Accommodations

Adjustments or modifications provided in a work environment to enable individuals with disabilities to perform their job duties effectively.