When There Are Economies of Scope Between Products,selling Off an Unprofitable

question 34

Multiple Choice

When there are economies of scope between products,selling off an unprofitable subsidiary could lead to:

• A) a major reduction in costs.
• B) only a minor reduction in costs.
• C) only a minor reduction in sales.
• D) a major reduction in sales.

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Definitions:

Repayment Of Principal

The process of paying back the original amount borrowed in a loan, excluding any interest charges.

Effective Annual Return

The interest rate on an investment on an annual basis, accounting for the effect of compounding more than once per year.

Nominal Interest

The rate of interest before adjustments for inflation; the stated interest rate on a financial product.

Compounding

The process of finding the future value of a single payment or series of payments.