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Consider the Following Statements

question 11

Multiple Choice

Consider the following statements:
I.A vertically integrated firm is more dependent on its suppliers than a firm that is NOT vertically integrated.
II.Many firms feel they can control quality better by making their own parts.
III.A vertically integrated firm realizes profits from the parts it is "making" instead of "buying" as well as profits from its regular operations.
Which of the above statements represent advantages to a firm that is vertically integrated?


Definitions:

M&M Theory

Modigliani and Miller's theory positing that in an ideal market, a company's value is unaffected by how it is financed, whether through debt or equity.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity which funds its overall operations and growth.

Total Cash Flows

The total sum of cash and cash-equivalents moving into and out of a company.

Capital Structure

The particular combination of debt and equity used by a firm to finance its overall operations and growth.

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