Which of the following is not true of unrelated diversification?
A) Involves buying firms outside of the company's primary lines of business
B) Involves shifting from a firm's core product lines into those which are perceived to have higher growth potential
C) Generally results in higher returns to shareholders
D) Generally requires that the cash flows of acquired businesses are uncorrelated with those of the firm's existing businesses
E) A and D only

Question

Quizplus · Accepted Answer

Unrelated diversification does not always result in higher returns to shareholders. Some studies have found that it can actually lead to lower returns, as the firm may not have the necessary expertise to effectively manage the new businesses.

Which of the Following Is Not True of Unrelated Diversification