What Rationales for Pursuing Unrelated Diversification Are NOT Likely to Increase

question 53

Multiple Choice

What rationales for pursuing unrelated diversification are NOT likely to increase shareholder value?

• A) In order 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 reduction in employment risk.
• E) All of these.

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Definitions:

Long-Term Debt

Borrowings that are due to be repaid more than one year in the future, often used for significant investments in the business.

Industrialized Economy

An economy characterized by significant industrial activity, high levels of income and employment, and a large manufacturing sector.

Consumption

The act of using goods and services by households or individuals, typically regarded as a primary economic activity.

Production

Production involves the process of creating, manufacturing, or enhancing goods and services.