Amber Corp., a jute manufacturing company, wants to diversify into the food industry. In order to do so, the board of directors decides to move some of its existing resources, expertise, and technology to set the base of the food unit. The market analysts at Amber predict that this unit has a high growth potential. Thus, rather than leaving the new food unit to grow on its own, the board decides to invest in it as it this will help increase the corporate value of the company. In this scenario, Amber Corp. is trying to create value by acting as a(n)_________.

Question

Quizplus · Accepted Answer

Amber Corp. is using its own resources, expertise, and technology to set up the new food unit. By investing in this unit, the board of directors is acting as an internal capital market. This approach allows the company to use its existing resources to expand and create value for shareholders. It also helps the company to diversify its operations and reduce risk by entering into a new market. Therefore, option B is the best choice.