Which of the Following Statements Is Not Generally True of a Diversification

question 16

Multiple Choice

Which of the following statements is not generally true of a diversification strategy based on the realization of economies of scope?

• A) The head office evaluates each business unit as a stand-alone operation.
• B) The strategy allows a company to realize cost economies from sharing manufacturing facilities, distribution channels, advertising campaigns, and research and development costs among business units.
• C) The strategy may allow a company to use shared resources more intensively, thereby realizing economies of scale.
• D) Managers must be aware of the costs of coordination.
• E) The strategy requires close coordination among different business units.

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Definitions:

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period to manage liquidity and ensure cash availability.

Incremental Approach

A decision-making process that focuses on analyzing the financial impact of small or incremental changes in operations or business activities.

Budgeting

The process of creating a plan to spend your money, outlining projected income and expenses.

Self-Imposed Budget

A budget that is created with the input and agreement of lower and middle management employees, improving commitment and enforcement.