Which of the following is a justification that a business adopts to justify diversification?
A) The strategy would allow a company to save themselves from the drawbacks of risk pooling.
B) Entry into new industries will rescue the core business and lead to long-term growth and profitability.
C) It decreases the range of threats the company encounters, and gives more time to managers had to spend dealing with these threats.
D) Business cycles of different industries are inherently easy to predict, so it is likely that a diversified company will find that an economic downturn affects only one of its business units.
E) Growth creates value for stockholders and growth is the objective of a diversification strategy.

Question

Quizplus · Accepted Answer

Justifying diversification by stating that it will rescue the core business and lead to long-term growth and profitability is a common reason for businesses to diversify. This is because entering new industries can help a company spread its risk and access new sources of revenue, allowing it to grow and remain profitable in the long run.

Which of the Following Is a Justification That a Business