A conglomerate discount refers to which circumstance?
A)The market value of the whole conglomerate is greater than the sum of the value of the parts.
B)The market value of the whole conglomerate is less than the sum of the value of the parts.
C)The book value of the whole conglomerate is greater than the sum of the value of the parts.
D)The book value of the whole conglomerate is less than the sum of the value of the parts.

Question

Quizplus · Accepted Answer

A conglomerate discount occurs when the market value of the entire conglomerate is less than the sum of the market values of its individual parts. This can happen because investors may perceive that the conglomerate is too diverse and difficult to manage, or that the parts would be worth more if they were sold separately. As a result, the conglomerate may trade at a discount to its true value.

A Conglomerate Discount Refers to Which Circumstance