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One of the Most Recognized Approaches to Business Portfolio Analysis

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Essay

One of the most recognized approaches to business portfolio analysis is the Boston Consulting Group's growth-share matrix.By dividing each dimension into high and low categories, the matrix contains four cells as shown in Figure 2-6 above.Identify and explain each quadrant represented by A, B, C, and D in the four quadrants of the matrix.


Definitions:

Interest Tax Shield

The reduction in taxable income for individuals or corporations achieved by deducting interest payments on borrowed funds.

M&M Proposition II

A theory proposing that the cost of equity increases as a company increases its leverage, due to the riskier equity stream.

Debt-Equity Ratio

A ratio assessing the comparative financing from equity and debt for a company’s assets.

Cost of Equity

The return a company theoretically pays to its equity investors, conceived as a compensation for taking on the risk of investing.

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