A firm can pass the better-off test in determining the viability of diversification when
A) the price of the acquired firm is low enough to yield a potential return on investment.
B) the total competitive advantage is above and beyond what the two businesses could achieve independently.
C) it acquires extremely high-cost industries.
D) it spends more time on implementation processes.

Question

Quizplus · Accepted Answer

The better-off test in diversification involves determining if the combined competitive advantage of the two businesses is greater than the competitive advantage of each business operating independently. Therefore, choice B is the correct answer. Choice A is not sufficient as a low price does not guarantee a potential return on investment, and choice C is unlikely to be advantageous as acquiring high-cost industries does not necessarily lead to better performance. Choice D is not directly related to the better-off test.

A Firm Can Pass the Better-Off Test in Determining the Viability