What Rationales for Unrelated Diversification Are Not Likely to Increase

question 33

Multiple Choice

What rationales for unrelated diversification are not likely to increase shareholder value?

• A) reduce risk by spreading the company's investments over a set of truly diverse industries
• B) enable a company to achieve rapid or continuous growth
• C) stabilize earnings; that is,market downtrends in some of the company's businesses will be partially offset by cyclical upswings in its other businesses
• D) provide benefits to managers such as high compensation and reduction in employment risk
• E) all of these choices are correct.

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Definitions:

Heuristics

Mental shortcuts or rules of thumb that simplify decision making, not guaranteed to be optimal, perfect, logical, or rational, but are sufficient for reaching an immediate goal.

Elimination

The process through which the body removes waste materials, such as urine and feces, from its systems.

Trial And Error

A fundamental method of solving problems characterized by repeated, varied attempts until success or a solution is achieved.

Problem Solving

Thoughts and actions required to achieve a desired goal that is not readily attainable.