Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

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Multiple Choice

Under which of the following circumstances is an organization most likely to consider divestment of a strategic business unit?

When the business unit has recently secured a major new market

When the business unit is generating the highest profits in the organization

When the business unit is essential for maintaining the company's competitive advantage

When the business unit consistently underperforms and no longer aligns with the company's core strategy

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Verified step by step guidance

Understand the concept of divestment: Divestment refers to the process of selling off or disposing of a business unit, asset, or investment that is no longer beneficial or aligned with the organization's goals.

Identify the key reason for divestment: Organizations typically consider divestment when a business unit consistently underperforms and no longer aligns with the company's core strategy. This ensures resources are allocated to areas with higher potential for growth or profitability.

Evaluate the options provided: Analyze each scenario to determine whether it aligns with the concept of divestment. For example, securing a major new market or generating high profits would not justify divestment, as these scenarios indicate strong performance.

Focus on strategic alignment: A business unit that is essential for maintaining competitive advantage would not be divested, as it plays a critical role in the company's success. Divestment is more likely when the unit fails to contribute to the company's strategic goals.

Conclude with the correct circumstance: The correct answer is that divestment is most likely when the business unit consistently underperforms and no longer aligns with the company's core strategy, as this ensures the organization can focus on more profitable or strategically aligned areas.