Question : Case Study: PQR Enterprises - Funding Strategies for Diversification
PQR Enterprises is a well-established conglomerate planning to diversify its business operations. The company is evaluating various sources of business finance to support its diversification plans.
Questions : Business Finance and Diversification
In the context of business finance, what does "diversification" refer to?
Option 1: Increasing shareholder dividends
Option 2: Expanding to international markets
Option 3: Reducing company workforce
Option 4: Expanding into new business areas
Correct Answer: Expanding into new business areas
Solution : The correct answer is (d) Expanding into new business areas
Diversification involves entering into new markets, launching new products or services, or expanding business operations into different areas or industries. The objective is to spread business risk by participating in various activities that may have different market dynamics, revenue streams, and growth potentials. This strategy helps the company balance its portfolio and reduce dependence on a single business line, potentially enhancing overall business sustainability and profitability.
What is the primary objective of financial planning for PQR Enterprises?
Option 1: Maximizing market share
Option 2: Achieving diversification
Option 3: Achieving long-term financial goals
Option 4: Meeting short-term operational needs
Why does PQR Enterprises need external financing for its diversification plans?
Option 1: To eliminate competition
Option 2: To decrease market share
Option 3: To reduce operational costs
Option 4: To fund new business ventures
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