For an Unrelated Diversification Strategy to Produce Financial Results Above

question 52

Multiple Choice

For an unrelated diversification strategy to produce financial results above that of stand-alone entities,executives must:

• A) diversify into businesses that can produce consistently good earnings and returns on investment and thereby satisfy the attractiveness test.
• B) negotiate favorable acquisition prices (to satisfy the cost-of-entry test).
• C) do a superior job of corporate parenting via high-level managerial oversight and resource sharing,financial resource allocation and portfolio management,or restructuring underperforming businesses (to satisfy the better-off test).
• D) satisfy the attractiveness test,the cost-of-entry test,and the better-off test.
• E) All of these.

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Definitions:

Satiety

The feeling of fullness or satisfaction that signifies the end of eating, regulated by hormonal signals in response to food intake.

Hypothalamus

A region of the brain responsible for producing hormones that regulate fundamental bodily functions, including temperature, hunger, and thirst.

Leptin

A hormone produced by fat cells that helps to regulate energy balance by inhibiting hunger.

Somatostatin

A hormone that inhibits the release of growth hormone from the anterior pituitary gland and also suppresses the release of various other hormones within the body's gastrointestinal system.