There Is Ample Room for Companies to Customize Their Diversification

question 80

Multiple Choice

There is ample room for companies to customize their diversification strategies and be defined as being either narrowly or broadly diversified, and when combination related-unrelated diversification strategy options are adopted, they have particular appeal to

• A)those companies with a mix of valuable competitive assets, covering the spectrum from generalized to specialized resources and capabilities.
• B)those large multibusiness firms, sometimes called conglomerates, because they have a unique capability designed to stabilize earnings.
• C)companies with a portfolio of product choices for buyer-related behavior.
• D)corporate managers who take on risks without performing due diligence.
• E)corporate managers who want to play the corporate parent role without fiduciary responsibility.

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Definitions:

Residual Income

The amount of income generated after all expenses and costs have been deducted from total revenues, often used in performance evaluation.

Minimum Required Rate

The lowest acceptable return on investment or performance measure that a company or investor expects to achieve.

Operating Assets

Resources owned by a business that are used in its day-to-day operations to generate income.

Residual Income

Income that remains after subtracting all the cost of capital from the net operating profit.