Under What Circumstances Might an Already Diversified Company Chose to Enter

question 24

Essay

Under what circumstances might an already diversified company chose to enter additional businesses and broaden its diversification base?

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Definitions:

High Dividend Payout

A policy where a company distributes a large portion of its earnings to shareholders in the form of dividends.

Flotation Costs

Expenses incurred by a company when issuing new securities, including underwriting fees, legal fees, and registration fees.

Significant

Of considerable importance, size, or worth; likely to have influence or effect.

Uncertainty Resolution

The process of clarifying and reducing the uncertainty in decision-making or forecasting, particularly through the gathering of more information oranalysis.