The Better-Off Test for Evaluating Whether a Particular Diversification Move

question 69

Multiple Choice

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves

• A) assessing whether the diversification move will make the company better off because it will produce a greater number of core competencies.
• B) assessing whether the diversification move will make the company better off by improving its balance sheet strength and credit rating.
• C) assessing whether the diversification move will make the company better off by spreading shareholder risks across a greater number of businesses and industries.
• D) evaluating whether the diversification move offers potential for the company's existing businesses and new businesses to perform better together under a single corporate umbrella.
• E) assessing whether the diversification move will benefit shareholders due to gains in earnings per share and faster stock price appreciation.

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