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Large companies should diversify their products and services across many different industries to be armoured against...

Large companies should diversify their products and services across many different industries to be armoured against cyclical downturns in individual industries. Do tou agree or disagree with the atatement? Why or why not?
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Answer #1

I agree with this statement because various company should always try to diversify their business in order to hedge against cyclical risk.

There is always a business cycle for specific industry and business should diversify into different industry in order to hedge its exposure into different segment.

Exposure into different segments of the market can lead to elimination of systematic risk and unsystematic risk associated with specific industry as loss in one segment can be negated by gain in other segment.

A business should always get itself diversified into various related sector in order to gain from favourable cycles and in order to protect itself from adverse cycle so that the exposure of business does not just kept concentrated in one segment and it is diversified into whole market so that it can be protected against economic downslide.

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