When a Firm Expands in the Production Process to Supply

question 43

Multiple Choice

When a firm expands in the production process to supply its own raw materials and intermediate products or to provide its own sales or distribution networks,the process is called

• A)horizontal merger.
• B)risk diversification.
• C)vertical integration.
• D)horizontal integration.

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Definitions:

FIFO vs. LIFO

Refers to the accounting methods for inventory management; FIFO stands for First-In, First-Out, indicating that the oldest inventory items are recorded as sold first, whereas LIFO stands for Last-In, First-Out, where the most recently produced or acquired items are the first to be expensed.

Economic Value Added

A measure of a company's financial performance based on the residual wealth calculated by deducting the cost of capital from its operating profit.

Residual Income

The amount of net income generated in excess of the minimum rate of return expected by shareholders or creditors, often used as a performance measure for investment or business valuation.

Stern & Stewart

A global management consulting firm known for its development of the Economic Value Added (EVA) concept.