When a Firm Divests Itself of an Unrelated Business to Focus

question 10

Multiple Choice

When a firm divests itself of an unrelated business to focus on it core competency, the firm is

• A)using economies of scope to cut costs.
• B)downsizing.
• C)outsourcing.
• D)market sharing.

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Definitions:

Dollars

Dollars are a unit of currency used in the United States and other countries, serving as a medium of exchange, unit of account, and store of value.

Arbitrage

The practice of exploiting price differences for the same asset in different markets by simultaneously buying and selling the asset to take advantage of those price differences.

Risk-free Rate

A forecasted return rate on a risk-free investment, usually shown through government security yields.

Futures Price

The agreed-upon price for the underlying asset in a futures contract to be paid at a future date.