The rising ratio of divestitures to new acquisitions that occurred in the past suggests that
A) poison pills are no longer effective as a defense against takeovers.
B) too much diversification strained the operating capabilities of many firms.
C) the portfolio effect has been a highly successful method of reducing risk.
D) multinational firms are increasingly considered high risk investments.

Question

Quizplus · Accepted Answer

The rising ratio of divestitures to new acquisitions suggests that many firms have learned that too much diversification can strain their operating capabilities, leading them to divest non-core businesses and focus on their core competencies. This trend indicates that firms are looking to simplify their operations and improve their overall performance by shedding non-core assets.

The Rising Ratio of Divestitures to New Acquisitions That Occurred