Question

Your investment banker has presented you with the following list of business characteristics of a small company your company is considering acquiring:
1. Market leadership
2. Large inventories
3. Lack of management depth
4. Cost advantages
5. Management turnover
6. Excess manufacturing capacity relative to market
Based on this list of characteristics, which of the following statements is true?
a. The list contains more weaknesses than strengths.
b. This list contains only strengths.
c. The list contains more strengths than weaknesses.
d. The list contains only weaknesses.
e. The list contains an equal number of strengths and weaknesses.

Answer 1

Answer:

A

Explanation:

The list contains more weaknesses than strengths

The list of weaknesses are:

Excess manufacturing capacity relative to market; If you are producing more than you are selling then its a weakness

Large inventories; that dont sell its a weakness

Lack of management depth; means that management does not have a proper foundation

Management turnover; if you keep changing management it will affect the company as skilled workers will be leaving

The list of strengths are:

Cost advantages; cost advantage against your competitors is an added strength

Market leadership; having a large market share is equally an advantage