The Attractiveness Test for Evaluating Whether Diversification into a Particular

question 45

Multiple Choice

The attractiveness test for evaluating whether diversification into a particular industry is likely to build shareholder value involves determining whether

• A) conditions in the target industry allow for profits and return on investment that is equal to or better than that of the company's present business(es).
• B) the potential diversification move will boost the company's competitive advantage in its existing business.
• C) shareholders will viewed the contemplated diversification move as attractive.
• D) key success factors in the target industry are attractive.
• E) there are attractive strategic fits between the value chains of the company's present businesses and the value chain of the new business it is considering entering.

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Definitions:

Model Business Corporation Act

A uniform set of laws that is designed to regulate the formation, operation, and dissolution of corporations, adopted by many U.S. states to facilitate business.

Close Corporation

A corporation with a limited number of shareholders and no public shares, often operated by a few individuals with closely aligned interests.

Charter of the Corporation

A legal document issued by a governmental authority that establishes a corporation and outlines its basic terms of operation, rights, and responsibilities.

Initial Directors

Initial directors are the first members of a corporation's board of directors, appointed at the time of incorporation to serve until the first shareholders' meeting.