Question

The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves assessing whether the diversification move A. will make the company better off because it will produce a greater number of core competencies. B. will make the company better off by improving its balance sheet strength and credit rating. C. will make the company better off by spreading shareholder risks across a greater number of businesses and industries. D. offers potential for the company's existing businesses and new businesses to perform better together under a single corporate umbrella. E. will benefit shareholders due to gains in earnings per share and faster stock price appreciation.

Answer 1

A. will make the company better off because it will produce a greater number of core competencies.

Step-by-step explanation:

The better-off test means that a business must benefit from the proposed diversification. This benefit van be a one time benefit or a continuous benefit

Reasons for diversification that don't pass the better of test

• Diversification to diversify shareholders investments
• Increasing the size of the company.