Question

the rising ratio of divestitures to new acquisitions which occurred in the past suggests that
select one
a poison pills are no longer effective as a defense against takeovers
b too much diversification strained the operating capabilities of many firms
c the portfolio effect has been a highly successful method of reducing risk
d multinational firms are increasingly considered highly risky investments

Answer 1

b too much diversification strained the operating capabilities of many firms

Divestitures is the selling or disinvestment of a particular business unit by an organisation. In case of diversification, an orgnaisation enters into different business in additon to its core business and that gives rise to a new business unit. If the new business doesnot provide suffiicient operating results, the business unit is sold which is divestiture. Thus increase in number of divstitures indicates the deterioration in operating capabilities of the company in managing new business units.