Answer:
The correcting journal entry will include: A credit entry to 1/1/26 Retained Earnings.
Explanation:
On Payment the entry must have been :
Prepaid Insurance $2,000 (debit)
Cash $2,000 (credit)
By the end of year 2025, one year insurance will have expired and entries will be as follows :
Insurance Expense $,1000 (debit)
Prepaid Insurance $1,000 (credit)
But Instead the entry in error was made as :
Insurance Expense $,1000 (debit)
Cash $2,000 (credit)
This results in the Retained Earnings being Understated by $1,000 .
The amount of overstatement is corrected as :
Prepaid Insurance $,1000 (debit)
Retained Earnings $,1000 (credit)
Felix launched both a Google Search Ad campaign and a Google Display Ad campaign to drive sales of tools on his home improvement website. He reviewed his sales data after two weeks and noticed his Search Ad campaign is the most successful. Which optimization type should Felix use if he wants to use bidding or targeting to acquire more customers?
Complete Question:
Felix launched both a Google Search Ad campaign and a Google Display Ad campaign to drive sales of tools on his home improvement website. He reviewed his sales data after two weeks and noticed his Search Ad campaign is the most successful. Which optimization type should Felix use if he wants to use bidding or targeting to acquire more customers?
Group of answer choices.
A. Channel
B. Media Mix
C. Attribution
D. Placements
Answer:
A. Channel.
Explanation:
In this scenario, Felix launched both a Google Search Ad campaign and a Google Display Ad campaign to drive sales of tools on his home improvement website. He reviewed his sales data after two weeks and noticed his Search Ad campaign is the most successful. The optimization type Felix should use if he wants to use bidding or targeting to acquire more customers is channel.
A Google Search Ad campaign involves changing the way or manner in which Ads are delivered to potential viewers (visitors) within a specific channel so as to boost a business. Basically, there are three (3) main types of channel optimization used in the Google Search Ad campaign and these are;
1. Bidding: it is used to get more customers by adjusting bids with respect to a comprehensive set of auction-time signals which targets your adverts.
2. Creative: it involves customizing assets to give or display the right and necessary information to the right customer at the right time.
3. Targeting: it involves the process of reaching the individuals or customers who are very much interested in your business through the dynamic and broad audience targeting.
Which of the following best describes the valuation principle? A. The rate at which we can exchange money today for money in the future by borrowing or investing is the current market interest rate and is same across all banks. B. It is not possible to compare costs and benefits that occur at different points in time, in different currencies, or with different risks. C. The value of a commodity or an asset to a firm or its investors is determined by its competitive market price. When the value of the benefits exceeds the value of the costs in terms of market prices, the decision will increase the market value of the firm. D. If equivalent goods or securities trade simultaneously in different markets across the world, they will trade for the same price.
Answer:
C. The value of a commodity or an asset to a firm or its investors is determined by its competitive market price. When the value of the benefits exceeds the value of the costs in terms of market prices, the decision will increase the market value of the firm.
Explanation:
Valuation principle is the process by which fair value of an asset is evaluated. It is determined by comparing its competitive market price against its benefits.
As the benefits of an asset exceeds its cost of purchase it increases in value.
Various methods are used to value an asset based on present value and projected value.
For example an analyst can consider the future purchasing power of a stock and use this as a basis for valuation rating
Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (7,300 units) $ 350,400 Variable expenses 204,400 Contribution margin 146,000 Fixed expenses 103,500 Net operating income $ 42,500 If the company sells 7,200 units, its net operating income should be closest to:
Answer:
Net operating income= 40,500
Explanation:
Giving the following information:
Contribution margin 146,000
Fixed expenses 103,500
Sales= 7,200
First, we need to calculate the unitary contribution margin:
Unitary contribution margin= 146,000/7,300= $20
Now, for 7,200:
Total contribution margin= 7,200*20= 144,000
Fixed costs= (103,500)
Net operating income= 40,500
Edwards Manufacturing Company purchases two component parts from three different suppliers. The suppliers have limited capacity, and no one supplier can meet all the company’s needs. In addition, the suppliers charge different prices for the components. Component price data (in price per unit) are as follows: Supplier Component 1 2 3 1 $10 $15 $14 2 $13 $12 $10 Each supplier has a limited capacity in terms of the total number of components it can supply. However, as long as Edwards provides sufficient advance orders, each supplier can devote its capacity to component 1, component 2, or any combination of the two components, if the total number of units ordered is within its capacity. Supplier capacities are as follows. Supplier 1 2 3 Capacity 1500 2500 2000 If the Edwards production plan for the next period includes 2,000 units of component 1 and 3,000 units of component 2, what purchases do you recommend
Answer:
Purchase 1,500 units of component 1 from supplier 1.
Purchase 2,000 units of component 2 from supplier 3.
Purchase 500 units of component 1 and 1,000 units of component 2 from supplier 2.
Total costs = $54,500
Explanation:
component 1 component 2
supplier 1 2 3 1 2 3
price $10 $15 $14 $13 $12 $10
capacity:
supplier 1 = 1,500
supplier 2 = 2,500
supplier 3 = 2,000
demand:
component 1 = 2,000component 2 = 3,000There are two ways to solve this, one using excel and the solver function or do it manually.
Manually, we must start with the supplier that has the lowest cost. In this case, the supplier with the lowest cost for component 1 is supplier 1 ($10) and component 2 is supplier 3 ($10).
We will start by purchasing 1,500 units of component 1 from supplier 1 at $15,000. That eliminates supplier 1's capacity, so we now only have suppliers 2 and 3. We still need 500 units of component 1 and 3,000 units of component 2.
We purchase 2,000 units of component 2 from supplier 3 at $20,000. This will consume all of supplier 3's capacity, so we only have supplier 2 left. We are still needing 500 units of component 1 and 1,000 units of component 2.
We will purchase the remaining units from supplier 3 at (500 x $15) + ($1,000 x $12) = $19,500.
Our total expense will be $54,500.
Which types of teams most are appropriate when the primary goal is innovation and the organization needs flexibility to cope with an uncertain environment
Answer:
Horizontal
Explanation:
An organization with a horizontal structure can be defined as that which is more flexible, dynamic and less bureaucratic, where employees have greater influence in the decision-making process and greater freedom in their work. Generally, employees need to report to only one manager and feel more motivated to contribute innovative ideas to the company due to greater autonomy and freedom at work.
The recognition of the need for organizations to improve the state of people, the planet, and profit simultaneously if they are to achieve sustainable, long-term growth (Connect Chapter 4) is referred to as
Answer:
The need for organisations (which may be governmental or non-governmental) to improve the condition of living of people and protect their environment whilst they pursue increased profitability has been termed
The Triple Bottomline.
It is also referred to by economists as the 3P - People, Planet and Profit.
It speaks to the fact that other than the usual making financial success the sole metric of measurement by which organisations are evaluated, their impact on people and the environment should be considered as well.
In simple terms, a firm should be termed more successful than others if it's activities besides being profitable also impacts positively on people and protects if not improves the environment.
Cheers!
Maroji is a major exporter of dairy products. Mipon is a major exporter of heavy machinery but also has a sizeable domestic dairy industry. Since it imports a sizeable amount of heavy machinery from Mipon, Maroji, at the request of Mipon, limited the amount of dairy products it exports to Mipon each year. This is an example of
Answer:
voluntary export restraint
Explanation:
Based on the scenario being described, this is an example of a voluntary export restraint or VER for short. This term refers to a trade restriction on the quantity of a specific good that the exporting country is allowed to export to other countries and is usually a self-imposed limit. Such restrictions are usually implemented in order to seek protection from competing imports from particular countries and prevent trade barriers.
Studies on a machine that molds plastic water pipe indicate that when it is injecting 1-inch-diameter pipe, the process standard deviation is 0.05 inches. The 1-inch pipe has a specification of 1 inch plus or minus 0.10 inch. What is the process capability index ( Cpk) if the long-run process mean is 1 inch?
Answer:
0.67
Explanation:
Given the following :
Process standard deviation(sd) = 0.05
Mean (m) = 1
specification of 1 inch plus or minus 0.10 inch
Upper specification limit(USL) = 1 + 0.1 = 1.1
Lower specification limit (LSL) = 1 - 0.1 =. 0.9
Cpk = min [[(m - USL) / 3(sd)], [(m - LSL) / 3(sd)]]
Cpk = min [[(1 - 1.1)/3(0.05)], [(1-0.9)/3(0.05)]]
Cpk = min[ -0.1/0.15], [ 0.1 / 0.15]
Cpk = min(-0.67, 0.67)
A sales agent, employed by the Sponsor's first-tier, downstream, or related entity (FDR), submitted an application for processing and requested two things: 1) to back-date the enrollment date by one month, and 2) to waive all monthly premiums for the beneficiary. What should you do?
Options :
A. Refuse to change the date or waive the premiums, but decide not to mention the request to a supervisors or the compliance department
B. Make the requested changes because the sales agent determines the beneficiary's start date and monthly premiums
C. Tell the sales agent you will take care of it, but then process the application properly (without the requested revisions) - you will not file a report because you don't want the sales agent to retaliate against you
D. Process the application properly (without the requested revisions), inform your supervision and the compliance officer about the sales agent's request
E. Contact law enforcement and the Centers for Medicare & Medicaid Services (CMS) to report the sales agent's behaviro
Answer: D. Process the application properly (without the requested revisions), inform your supervision and the compliance officer about the sales agent's request.
Explanation: In the scenario described above, the sales agent request are huge and probably violates ideal business process. When such requests are made, it is important to take note of the requester and it's requests even though such request of rolling back enrollment date and waiving of monthly premium should not be processed. The appropriate heads and stakeholders should be duly informed such as the suowrvisor and compliance officer in other to investigate and uncover why such request was made by the sales agent and then take necessary steps required.
A swap bank Group of answer choices (A) can act as a broker, bringing together counterparties to a swap. (B) can act as a dealer, standing ready to buy and sell swaps. (C) both (A) and (B). (D) only sometimes (A) but never ever (B).
Answer:
Option C
Explanation:
In simple words, A swap bank refers to the entity that serves as just a broker for two counterparties that decide to apply through a rate of interest or exchange swap arrangement and must remain confidential. The swap banking incorporates both parts of the transaction and usually receives a reward price from both underwriters to encourage the swap.
Thus, from the above we can conclude that the correct option is C.
Ms. Marsh filed her 20X0 individual income tax return on February 15, 20X1. All her tax was paid during the year through withholding. The return was due on April 15, 20X1. During January 20X2, she discovered that she had not taken a properly substantiated charitable contribution that would have reduced her total tax by $250 on her 20X0 tax return. By what date must she file her amended return to claim a refund of the tax paid?
Answer:
April 15, 20x4
Explanation:
Ms. Marshall can file for a refund until the later of the following 3 dates:
3 years from her original tax filing (February 15, 20x4)3 years from the due date of her original tax filing (April 15, 20x4)2 years since paying her taxes (December 31, 20x2)In this case, the later date would be April 15, 20x4
The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Retained earnings balance at the beginning of the year $ 127,500 Cash dividends declared for the year 47,500 Proceeds from the sale of equipment 82,500 Gain on the sale of equipment 7,300 Cash dividends payable at the beginning of the year 19,500 Cash dividends payable at the end of the year 21,800 Net income for the year 93,500 What is the ending balance for retained earnings
Answer:
Explanation:
Retained earning is the amount of net income left for the business owners after paying out dividends to its shareholders , which can be utilized for further expansion as the strategy may require .
To calculate the retained earning for a particular period , the opening retained earning is added to the loss or profit and the dividends payout subtracted
Retained earning = Opening retained earning + net income - dividends paid
127,500+ 93,500 - 47,500
127,500+93,500 -47,500 = 173,500.
Your customer purchases FYZ 4% convertible preferred stock at $60 per share. The conversion price is $10. With the common stock now trading 1 point below parity, you know that the common shares of FYZ are trading at
Answer:
$9
Explanation:
Calculation for how much the common shares of FYZ are trading
First step is to find the conversion ratio
Using this formula
Conversion ratio =Market price of the convertible+Conversion price)/Conversion price
Let plug in the formula
Conversion ratio=$70/$10
Conversion ratio=7
Second step is to calculate for the Parity price of the common stock
Using this formula
Parity price=Market price of the convertible / conversion ratio
Let plug in the formula
Parity price=$70/7
Parity price=$10
Last step is to calculate how much the common shares of FYZ are trading
Using this formula
Common shares =Parity price-Common stock trading point
Let plug in the formula
Common shares =$10-1
Common shares=$9
Therefore the common shares of FYZ are trading at $9
As a factor of production how is capital created A. by adding land to entreprenurship B. by adding human labor to land C. by removing land from services D. by using labor to create services
Answer:
is by adding human labor to land
Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes. According to the Coase theorem, government action is ________ to achieve an ________ amount of pollution
Answer:
not necessary; efficient.
Explanation:
Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes. According to the Coase theorem, government action is not necessary to achieve an efficient amount of pollution. Coase theorem was developed in 1960 by a British economist and author named Ronald Coase.
Coase theorem states that when the actions of a party (X) negatively affects or harm another party (Y), then party Y should be able to create an incentive for party X to stop or limit the action creating such harm.
Hence, when transaction cost are low, the two parties are able to bargain and reach a mutual agreement in the presence of an externality such as a pollution.
All the following statements concerning term insurance are correct EXCEPT: Group of answer choices Most policies can be renewed for additional periods without evidence of insurability. Most policies can be converted to a permanent life insurance policy. Most policies have a nonforfeiture benefit to refund a portion of a policy's cash value when coverage stops. The insurance provides protection for a certain period of time.
Answer: Most policies have a nonforfeiture benefit to refund a portion of a policy's cash value when coverage stops.
Explanation:
Term insurance is a type of life insurance policy whereby the policy owner will be given coverage for a particular time period.
It should be noted that term insurance can be renewed for additional periods without evidence of insurability and can also be converted to a permanent life insurance policy.
The option that most policies have a nonforfeiture benefit to refund a portion of a policy's cash value when coverage stops is not true.
started the year with total assets of $30,000 and total owner's equity of $20,000. During the year a) assets increased by $20,000, b) the business recorded $45,000 in revenues, c) the business recorded $30,000 in expenses, and d) the owner withdrew $5,000 for personal use. Liabilities at the end of the year were:
Answer:
$20,000
Explanation:
The computation of the liabilities at the end of the year is shown below:
As we know that
Total assets = Total liabilities + equity
where,
Total assets are
= Begining balance + increased assets
= $30,000 + $20,000
= $50,000
And, the equity is
= Starting balance + revenues - expenses - withdrawn amount
= $20,000 + $45,000 - $30,000 - $5,000
= $30,000
So, the liabilities is
= $50,000 - $30,000
= $20,000
The ________ is a job analysis method that depends on a panel of experts to determine the standards that need to be met by an ideal worker.
Answer:
Panel of experts
Explanation:
For analyzing the job in the correct way, the expert panels are equally important. Expert in this mean who has perfect in his or her area or specialization that contains sufficient knowledge and skills
Different jobs have different experts that are required time to time
Its motive is to analyze the job in a correct and right way
Also, it determines that the standards of an organization are met or not by an ideal worker
The Bureau of Labor Statistics reported the CPI stood at 215.9 in December 2009, while one year earlier it was 210.2. Suppose Janice's nominal income rose by 4% from December 2008 to December 2009 while Jeff's increased by only 2%. By what percentage did each of their real incomes change?
Answer:
Annual rate of inflation = [(215.9 - 210.2) / 210.2] * 100
Annual rate of inflation = 2.7%
Real income change = Nominal income change - inflation rate
Janice Real income change = 4% – 2.7%
Janice Real income change = 1.3%
This means Janice's real income did increase by 1.3%.
Jeff Real income change = 2% – 2.7%
Jeff Real income change = -0.7%
This means Jeff's real income did decrease by 0.7%.
The management of Cooper Corporation is considering the purchase of a new machine costing $420,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0. 909, 0. 826, 0. 751, 0. 683, 0. 621, respectively. In addition to this information, use the following data in determining the acceptability in this situation: Year Income from Operations Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The present value index for this investment is a.1.45. b.1.08. c.0.92. d.0.36.
Answer:
b.1.08.
Explanation:
The computation of the present value index is shown below;
As we know that
Present Value Index = Present value of Net Cash Inflow ÷ Initial Cash outflow
where,
Initial investment = $420,000
And, the present value of net cash inflows are
Year Cash Flow (in $) PVF at 10% Present Value (in $)
1 180,000 0.909 163,620
2 120,000 0.826 99,120
3 100,000 0.751 75,100
4 90,000 0.683 61,470
5 90,000 0.621 55,890
TOTAL 455,200
So, the present value index is
= $455,200 ÷ $420,000
= 1.08
The free rider problem is a situation in which A. one agent secures benefits that others pay for B. all of the above. C. none of the above. D. there are excessive subsidies given to polluting buses or other forms of mass transit E. Effluents such as CFCs combine with ozone and decrease concentrations of that protective chemical F. perfect property rights exits
Answer:
b). one agent secures benefits that others pay for.
Explanation:
The free-rider problem is described as the problem when some individuals consume or take the benefit of a resource without paying for it. in this problem, one agent is being benefitted from the resources that the others are paying for. This creates a load on a shared resource and eventually causes market failure. In order to cope with this problem, the organizations must ensure a fair distribution of resources and their benefits as per the payment made by the agents. Therefore, option B is the correct answer.
When Ira purchased 500 shares of prefeHallie owns 20% of the common stock of the Bean Brothers Coffee Company. The company announced plans to offer an additional 10,000 shares of common stock for sale. If Hallie exercises her preemptive rights, Bean Brothers must offer her the opportunity to purchase stock in the Fairlawn Corporation, his certificate indicated the stock had a par value of $50 per share. This means that Ira:________.
Complete Question:
Hallie owns 20% of the common stock of the Bean Brothers Coffee Company. The company announced plans to offer an additional 10,000 shares of common stock for sale. If Hallie exercises her preemptive rights, Bean Brothers must offer her the opportunity to purchase?
Answer:
2,000 shares
Explanation:
The preemptive rights is the equal opportunity to each shareholder to purchase a proportionate of new shares issuing at the stock exchange to retain its ownership or control position.
Halie has purchased 20% of the company's shares then, if the company is going to issue 10,000 shares of common then 20% of it will be preemptive rights given to Halie as she owns 20%. This means 2,000 share which is 20% of new share offerings would be preemptive rights.
Under the NASAA model custody rule, an investment adviser would be considered to have custody of client assets if that adviser inadvertently receives:
i. a check from a client from a client made out to the IA and does not return the check within 24 hours
ii. a check from a client made out to a third party and Does not forward the check within 3 business days
iii. stock certificates from a client and does not forward them within 3 business days
iv. stock certificates from a client and does noT return them within 3 business days
Answer:
(ii) A check from a client made out to a third party and does not forward the check within 3 business days .
(iv) Stock certificates from a client and does not return them within 3 business days.
Explanation:
As per the NASAA model custody rule, the investment advisor will have the custody of the assets of the client an associated person only if the adviser accidentally receives ' a check has been made by the client to the third party but it is not forwarded within three business days' and when 'the certificates of stocks from the client not returned to them within three business days.' Thus, these indirect documents make the adviser eligible to have custody of client's possessions. Thus, the options ii and iv are the correct answers.
An HR manager asked every candidate during an interview to describe a situation in the past in which they had to display their leadership abilities even though they were not a formal leader, discuss what they did, and describe the result. This is an example of which external assessment method
Answer:
Situational interview.
Explanation:
In this scenario, an Human Resource (HR) manager asked every candidate during an interview to describe a situation in the past in which they had to display their leadership abilities even though they were not a formal leader, discuss what they did, and describe the result. This is an example of situational interview.
Situational interview can be defined as the process in which job applicants are made to describe or narrate how they acted in the past in a circumstance or conflict situation and how they were able to overcome the challenges.
All the following statements concerning universal life insurance are correct EXCEPT: Group of answer choices Interest credited to the cash value is taxable to a policyowner in the year credited. The policyowner can add to a policy's cash value at any time subject to policy guidelines. Interest is credited to the policy's cash value each month. Withdrawals from a policy's cash value reduce the death benefit.
Answer:
Withdrawals from a policy's cash value reduce the death benefit.
Explanation:
Universal life insurance is a permanent life insurance plan that has flexible premium payments and premiums are also low.
Only a determined death benefit is paid to the policy holder's beneficiary.
As premium is paid to the account, it earns interest. The excess amount above the death benefit is called the cash value.
Policy holder is allowed to withdraw the cash value and the withdrawal is subject to taxation.
However these withdrawals do not affect the death benefit which is fixed. Policy holder cannot withdraw into the death benefit amount.
When the policy holder does the insurance company keeps the cash value (excess over dear benefit amount). While the beneficiary gets only the agreed death benefit.
So the statement - Withdrawals from a policy's cash value reduce the death benefit.
Is untrue.
The voucher system of control: Multiple Choice Is a set of procedures and approvals designed to control cash receipts and the acceptance of obligations. Establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement. Establishes procedures for receiving checks for the sale of verified, approved, and recorded activities. Applies only when multiple purchases are made from the same supplier. Is required in large companies but not beneficial for small to mid-sized companies.
Answer: Establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement.
Explanation:
The voucher system control is used to ensure that cash will only be spent on the purchases that are authorized.
The voucher system of control establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement.
decides to use the needs approach to determine how much life insurance to buy. Her cash needs are $30,000; her income needs are $140,000; and her special needs are $100,000. Ellen has the following assets: $20,000 in bank accounts, $30,000 in retirement accounts, and $40,000 in investment accounts. She does not own any individual life insurance, but she is covered by a $50,000 group life insurance policy through her employer. Judging solely from this information, how much additional life insurance (if any) should Ellen purchase
Answer:
$130,000
Explanation:
For determining the additional life insurance required first we need to follow some steps which are shown below:-
Step 1
Total needs = Cash needs + Income needs + Special needs
= $30,000 + $140,000 + $100,000
= $270,000
Step 2
Total assets held = Bank accounts + Retirement plans + Investment accounts
= $20,000 + $30,000 + $40,000
= $90,000
Step 3
Total amount of life = $270,000 - $90,000
= $180,000
and finally
Additional life insurance required =
The Total amount of life - Life insurance provided by the employer
= $180,000 - $50,000
= $130,000
A deficit on the current account:__________.a) has no relationship to the capital and financial account. b) means that a nation is making international transfers. c) normally causes a deficit on the capital and financial account. d) normally causes a surplus on the capital and financial account.
Complete Question:
A deficit on the current account:
Group of answer choices
a. normally causes a surplus on the capital and financial account.
b. normally causes a deficit on the capital and financial account.
c. has no relationship to the capital and financial account.
d. means that a nation is making international transfers.
Answer:
a. normally causes a surplus on the capital and financial account.
Explanation:
A deficit can be defined as an amount by which money, falls short of its expected or required value.
Generally, deficit in financial accounting is usually as a result of expense exceeding revenue or revenue falling below expenses at a specific period of time.
For instance, when liabilities exceeds assets or import exceeds export there would be a deficit in the financial account.
A deficit on the current account normally causes a surplus on the capital and financial account. This is simply as a result of a country having to import more goods and services than it is exporting to other countries in trade.
Simply stated, a deficit on the current account ultimately implies that the value of goods and services exported is lower than the value of goods and services being imported in a particular country.
Name brand drugs are able to continue capitalizing on their market power even after generic drugs enter the market because (i) almost all people fear the generic drug companies are devoting too few resources to research and development. (ii) some people fear that generic drugs are inferior. (iii) some people are loyal to the name brand. Group of answer choices
Answer:
This question is incomplete, the options are missing. The options are the following:
a) (i) and (ii) only.
b) (ii) and (iii) only.
c) (i) and (iii) only.
d) (i), (ii) and (iii).
And the correct answer is the option D: (i), (ii) and (iii).
Explanation:
To begin with, the fact that the pharmaceutical industry keeps growing and that those companies with name brand drugs continue capitalizing their market power even after the generic drugs have entered the market is due to the facts that the population belives that the majority of the brands are better that those that work with generic products and because of that they also believe that those companies do not invest much in I&D because they have low demand and that reason influence in the feelings of the people who believe that the generic drugs are inferior in comparison to the other ones.
A firm's diversification strategy is most likely to add value if:________. a. There exist economies of scope between diversified business units. b. The firm has a comprehensive business portfolio in different industries. c. The diversification strategy enables the firm to enter several unrelated businesses. d. It enters unfamiliar market through aggressive acquisitions.
Answer:
Option A. There exist economies of scope between diversified business units
Explanation:
The reason is that diversification is lowering the industry risk of the business the company is in by investing in several other industries. This helps us to lower the risk and have a steady returns in the subsequent years. This means uncertainty related to cash flows is lowered and this has also increased the chances of cash surplus for subsequent years.
Furthermore, if the investments made in diversified business units possesses economies of scope, which means that we are in related diversification because we are manufacturing different but similar goods which are substitutes to each other from large to some extent. This brings economies of scope and would lower the total operating cost of company. Hence the Option A which says that economies of scope does add value to the company is the right option.
Option B is not preferable option as the option of investing in different businesses is choosen in the option A.
Option C is again the same as Option B and the difference is that it uses the word several unrelated businesses instead of comprehensive business portfolio which is the same thing. Hence Option C is also not preferable option here.
Option D is incorrect because when we acquire an organization it is the move of increase in risk portfolio because acquisitions are mostly not a sound investments and not a part of diversification strategy as the company is putting all the eggs in the single basket.
