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.

Understand the role and development of normative theories in accounting.

Comprehend the components and consequences of agency costs, including monitoring and bonding costs, and residual losses.

Understand the economic assumptions underlying positive accounting theory, including the rational economic person assumption.

Recognize the importance of accounting policy decisions in financial reporting.

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Definitions:

Testable Explanation

A hypothesis that can be supported or refuted through experimentation and observation, forming the basis of scientific inquiry.

Time-Tested

Proven to be reliable or effective over a long period of time.

Physical Environment

The surroundings or conditions in which a person, animal, or plant lives or operates, including air, water, and land.

Ecosystem

Living creatures and the non-living parts of their habitat come together, forming a system through interaction.