An argument in favour of diversified companies with a balance of cash-generating and cash-devouring businesses is that it is cheaper and easier to balance capital requirements internally than to source capital in the financial markets.

Question

Quizplus · Accepted Answer

When a company has a balance of cash-generating and cash-devouring businesses, it has the ability to allocate capital efficiently between these businesses, without seeking additional financing from external sources. This internal funding reduces the company's dependency on financial markets, which can be expensive and time-consuming to access. Therefore, a diversified company with a balanced portfolio of businesses is likely to be able to manage its capital requirements more effectively and economically.

An Argument in Favour of Diversified Companies with a Balance