For the acquiring firm,diversification:
A)will automatically produce gains.
B)will reduce both risk and debt capacity.
C)may or may not provide financial benefits.
D)will provide risk reduction for all shareholders' portfolios.
E)may result in a risk-free firm.

Question

Quizplus · Accepted Answer

Diversification may or may not provide financial benefits for the acquiring firm. It depends on various factors such as the type of diversification, the nature of the industry, management expertise, and the firm's financial resources. Moreover, diversification may also have drawbacks such as reduced focus, lack of synergy, and increased complexity. Therefore, it is essential to evaluate the potential benefits and costs of diversification carefully.

For the Acquiring Firm,diversification