A Joint Venture Is an Attractive Way for a Company

question 21

Multiple Choice

A joint venture is an attractive way for a company to enter a new industry when

• A) the pool of attractive acquisition candidates in the target industry is relatively small.
• B) it needs better access to economies of scope in order to be cost-competitive.
• C) the industry is growing slowly and adding too much capacity too soon could create oversupply conditions.
• D) the firm has no prior experience with diversification and the industry is on the verge of explosive growth.
• E) the opportunity is too risky or complex for a company to pursue alone or when a company lacks some important resources or competencies and needs a partner to supply them.

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Definitions:

Expenses

The costs incurred by a business in the process of earning revenue, such as rent, salaries, and utilities.

Statement Of Cash Flows

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company, showing how well it manages its cash position.

Cash Balance

The amount of cash held in a company's bank account and on hand at any given time.