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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Definitions:

Long-term Potentiation

A long-lasting enhancement in signal transmission between two neurons that results from their synchronous stimulation.

Synaptic Connections

The points at which neurons (nerve cells) communicate with each other, allowing for the transmission of signals through the nervous system.

Glutamate

A major neurotransmitter in the nervous system, playing an important role in learning and memory by exciting neurons to transmit signals.

Learning

A change in behavior, resulting from experience.