A Large Company Diversifies by Adding an Entirely Unrelated Business

question 82

Multiple Choice

A large company diversifies by adding an entirely unrelated business or product to its organizational design. The new business or product is owned by the acquiring company. This is an example of a:

• A) joint venture.
• B) strategic alliance.
• C) conglomerate.
• D) divisional organizational design.

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Definitions:

Cyclical Dividend Policy

A dividend payment strategy where dividends fluctuate in line with the company's earnings, which often coincide with economic cycles.

Retention Ratio

The percentage of net income that is retained by a company rather than distributed to its shareholders as dividends.

Quarterly Earnings

A corporation's earnings reported on a quarterly basis, giving investors and analysts an interim view of financial performance and profitability.

Stock Split

A company strategy to divide its existing shares into a larger number of shares to enhance the liquidity of the shares.