Acquisition of an Existing Business Is an Attractive Strategy Option

question 99

Multiple Choice

Acquisition of an existing business is an attractive strategy option for entering a promising new industry because it:

• A) is an effective way to hurdle entry barriers,is usually quicker than trying to launch a brand-new startup operation,and allows the acquirer to move directly to the task of building a strong position in the target industry.
• B) is less expensive than launching a new startup operation,thus passing the cost-of-entry test.
• C) is a less risky way of passing the attractiveness test.
• D) is more likely to result in passing the shareholder value test,the profitability test,and the better-off test.
• E) offers the prospect of gaining an immediate competitive advantage in the new industry and thus helps ensure that the diversification move will pass the competitive advantage test for building shareholder value.

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Definitions:

Estimated

An approximation or educated guess based on available data, rather than an exact measurement.

Test Statistic

A calculation, derived from sample data, used to determine the presence of a statistically significant difference between groups in hypothesis testing.

One-Sample Test

A statistical procedure used to determine whether a sample comes from a population with a specific characteristic.

Proportions

A statistical measure that represents the size of part of a whole, typically expressed as a fraction or percentage.