Which of the Following Is Not a Downside of Portfolio

question 54

Multiple Choice

Which of the following is not a downside of portfolio models used to assist a firm in balancing its portfolio of businesses?

• A) Portfolio models compare SBUs on only two dimensions under the assumption that these are the only factors that matter.
• B) Portfolio models view each SBU as a stand-alone entity.
• C) Portfolio models rely on loose rules regarding resource allocation across the SBUs.
• D) The evaluation process risks becoming mechanical and oversimplified.

---

Definitions:

Wasted Capacity

Resources or production capabilities that are underutilized or not used to their full potential, leading to inefficiencies.

Overbooking

A strategy used in various industries where more reservations or orders are accepted than can be accommodated, based on expected cancellations or no-shows.

Excessive Cancellations

A situation where there is a higher than normal rate of order cancellations, which can disrupt operations and planning in businesses.

Marginal Revenue

The additional income received from selling one more unit of a product or service.