The Three Tests for Judging Whether a Particular Diversification Move

question 54

Multiple Choice

The three tests for judging whether a particular diversification move can create value for shareholders are the

• A)attractiveness test, the profitability test, and the shareholder value test.
• B)strategic fit test, the competitive advantage test, and the return-on-investment test.
• C)resource fit test, the profitability test, and the shareholder value test.
• D)attractiveness test, the cost of entry test, and the better-off test.
• E)shareholder value test, the cost of entry test, and the profitability test.

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Definitions:

Net Income

The total amount of profit earned by a company after all expenses and taxes have been deducted from revenue.

Consolidated Financial Statements

Combined financial statements of a parent company and its subsidiaries, showing the financial results and financial position as if the group were a single entity.

Common Stock

Equity ownership in a corporation, granting shareholders voting rights and a share in the company's profits via dividends, pertaining to the fundamental stake in the company’s equity.