Economies of Scope Can Be Defmed As

question 53

Multiple Choice

Economies of scope can be defmed as:

• A)competencies that result from the skills of a company's top managers that help every business unit within a company perform at a higher level than it could if it operated as a separate or independent company.
• B)some kind of skill or competency that when shared by two or more business units allows them to operate more effectively and create more value for customers.
• C)the process of taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry.
• D)the process of taking a distinctive competency developed by a business unit in one industry and using it to create a new business unit in a different industry.
• E)the synergies that arise when one or more of a diversified company's business units are able to lower costs or increase differentiation because they can more effectively pool, share, and utilize expensive resources or capabilities.

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Definitions:

CGT

Capital Gains Tax, a tax on the profit realized on the sale of a non-inventory asset that was purchased at a cost amount that was lower than the amount realized on the sale.

Selling New Common Stock

The process whereby a company issues and sells additional shares of its common stock to investors to raise capital.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements and it can also be viewed as the risk-free rate of return plus a risk premium.

Capital Budgeting Projects

Capital budgeting projects are long-term investment decisions made by companies to invest in assets and projects for future growth and profitability.