Which is a more efficient mechanism for allocating capital among different businesses: the internal capital allocation of diversified firms or the external capital market?
A)The internal capital allocation process of diversified firms
B)The external capital market
C)It depends on the effectiveness of the specific firm's capital allocation process
D)It depends on the effectiveness of the specific firm's capital allocation process and the efficiency of the capital market in the country where the firm is located.

Question

Quizplus · Accepted Answer

The effectiveness of a specific firm's internal capital allocation process and the efficiency of the external capital market in the country where the firm is located are both important factors in determining which mechanism is more efficient for allocating capital among different businesses. If a diversified firm has a highly effective internal capital allocation process, it may be able to allocate capital more efficiently than the external capital market. However, if the capital market in a particular country is highly efficient, it may be more efficient for businesses to rely on external capital allocation. Therefore, the answer is D.

Which Is a More Efficient Mechanism for Allocating Capital Among