Question

Diversification merits strong consideration whenever a single-business company: Select one: a. Is faced with diminishing market opportunities and stagnating sales in its principal business. b. Has integrated backward and forward as far as it can. c. Has achieved industry leadership in its main line of business. d. None of the above

Answer 1

Answer:

The answer is option A) Diversification merits strong consideration whenever a single-business Is faced with diminishing market opportunities and stagnating sales in its principal business company

Explanation:

Diversification is a technique that reduces risk by allocating investments among various financial instruments, industries, and other categories. It aims to maximize returns by investing in different areas that would each react differently to the same event.

It's important to diversify among different asset classes. Different assets such as bonds and stocks will not react in the same way to adverse events. A combination of asset classes will reduce your portfolio's sensitivity to market swings. Generally, bond and equity markets move in opposite directions, so if your portfolio is diversified across both areas, unpleasant movements in one will be offset by positive results in another.

Answer 2

Answer:

Diversification merits consideration whenever a single-business company is faced with diminishing market opportunities and stagnating sales in its principal business.

Explanation:

A business diversifies by establishing business presence in related or unrelated markets in order to ensure that their profitability overall is not hampered unfavorable climate in one business line.

Diversification is similar to not putting one's eggs in one single basket where they could all be destroyed at once.

By allocating investments between different business lines, negative occurrences in one sector is absorbed by other sectors,hence overall profits are safeguarded and business continuity is guaranteed.