Question

The strategic options to improve a diversified company's overall performance do not incluce which of the following categories of actions?

A. Broadening the company's business scope by making new acquisitions in new industries.
B. Increasing dividend payments to share-holders and/or re-purchasing shares of the company's stock.
C. Re-structuring the company's business line-up and putting a whole new face on the company's business make-up.

Answer 1

B. Increasing dividend payments to share-holders and/or re-purchasing shares of the company's stock.

Step-by-step explanation:

Diversification reduces investment risks by allocating investments in a variety of assets categories. A business that diversifies will operate in different industries as opposed to exposing itself to a single sector. Improving the diversification aspects involve investing in new industries, thereby minimizing overall risks should a particular sector not perform as expected.

Re-structuring company business line-up would improve prospects, especially if the old team was under-performing. Injecting a new management team, introduces fresh ideas that can lead to better performances.

Increasing dividends would make shareholders happy but denies the business expansion capital. Re-purchasing shares in counter-diversification as the business would be re-investing in itself.