How Can a Firm Pursuing a Diversification Strategy Enhance Its

question 89

Multiple Choice

How can a firm pursuing a diversification strategy enhance its overall corporate performance by leveraging financial economies?

• A) by using internal capital markets as a source of value creation
• B) by adding more unrelated businesses into its corporate portfolio
• C) by increasing its coordination and influence costs
• D) by investing in businesses under the question mark quadrant of the BCG matrix

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Definitions:

Short-Run Losses

Financial deficits that a firm experiences in the period where at least one factor of production is fixed, leading to an inability to cover total costs.

Operate

The act of functioning or running a business or machine, carrying out actions necessary for performance.

Average Variable Cost

the total variable cost divided by the quantity of output produced; it shows the variable cost per unit of output.

Short Run

The short run is a period in which at least one factor of production is fixed, limiting the ability of a business to expand or reduce its output.