Question

Greg is the CEO of a leading company in the consumer packaged goods industry. He is trying to grow his company for personal gain and wealth. However, Greg sees that his company has an opportunity to break into the chemical industry. He has decided to invest free cash flow into acquiring small chemical companies that have the potential for growth if funded properly. Shareholders are not happy because they are concerned about:

Answer 1

Answer: Over-diversification

Explanation:

 According to the given question, the Over-diversification is one of the concept in the business in which the an organization make a large number of investment of the different types of asset where the expectation of the marginal cost become high.

Greg is one of the leading company CEO and for the growth of the company he has decided for acquiring some small chemical firms for increase the productivity but the shareholder are not happy with this due to the over-diversification concept.

The over-diversification also increase the risk in the investment process but there is always high possibility of marginal benefit in the business. Therefore, Over-diversification is the correct answer.