A Key Issue in Companies Pursuing an Unrelated Diversification Strategy

question 25

Multiple Choice

A key issue in companies pursuing an unrelated diversification strategy is

• A) how wide a net to cast in building a portfolio of unrelated businesses.
• B) whether to keep or divest businesses whose technological approaches do not match the overall technology and R&D strategy of the corporation.
• C) how quickly to divest businesses whose competitive strategies do not closely match the competitive strategies of sister businesses.
• D) whether to build shareholder value via paying higher dividends or via actions aimed at increasing the company's stock price.
• E) whether to acquire new businesses that offer potential for achieving greater economies of scope or businesses that offer potential for achieving greater economies of scale.

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Definitions:

Proportion

A segment, piece, or amount looked at in relation to the entirety.

Acid-test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick assets, providing insight into its short-term liquidity without relying on inventory assets.

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of the business, whichever is longer.

Inventory

Inventory consists of goods and materials a business holds for the ultimate purpose of sale, production, or utilization.