Which of the Following Statements Regarding Vertical Integration Is False

question 41

Multiple Choice

Which of the following statements regarding vertical integration is false?

• A) Vertically integrated companies may be large, but unlike other large corporations, since they remain focused in one industry they are easy to run.
• B) A company might not be happy with how its products are being distributed, so it might decide to take control of its distribution channels.
• C) A company might conclude that it can enhance its product if it has direct control of the inputs required to make the product.
• D) The principal benefit of vertical integration is coordination. By putting two companies under central control, management can ensure that both companies work toward a common goal.

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Definitions:

Operating Cash Flow

The cash generated from a company's normal business operations, indicating the ability to generate adequate cash flow to maintain and expand operations.

Cash Flow From Assets

The total amount of money being transferred into and out of a company's assets, which includes operations, investments, and financing activities.

Book Value

The net value of a company's assets, minus its liabilities, often used to assess if a company's stock is under- or overvalued.

Market Value

The price at which assets or services are currently being offered in the marketplace.