Firms A and B formally agree to each put up $25 million to create firm C. Firm C will perform environmental testing on the products produced by both Firm A and Firm B. Which one of the following terms describes Firm C?
A) Joint venture
B) Going-private transaction
C) Conglomerate
D) Subsidiary
E) Leveraged buyout

Question

Quizplus · Accepted Answer

Firm C is a joint venture, which is a business arrangement between two or more parties who agree to combine resources and expertise for a specific project or business venture. In this case, Firm A and B are creating a new entity to perform a specific function (environmental testing) for their own products, and both parties are contributing funds to create the new entity.

Firms a and B Formally Agree to Each Put Up