A company may purchase a noncontrolling interest in another firm in a related industry
A) to house excess cash until needed.
B) to generate earnings.
C) for strategic reasons.
D) for speculative reasons.

Question

Quizplus · Accepted Answer

A company may purchase a noncontrolling interest in another firm in a related industry for strategic reasons such as gaining access to new technologies, expanding its product line, or reducing competition. The purpose is not to house excess cash until needed or solely for speculative reasons, although generating earnings may also be a secondary benefit.

A Company May Purchase a Noncontrolling Interest in Another Firm