QuestionAugust 15, 2025

Divestment is often used as a means to counter the __ discount. A retrenchment B spin-off C liquidation D retracement E diversification

Divestment is often used as a means to counter the __ discount. A retrenchment B spin-off C liquidation D retracement E diversification
Divestment is often used as a means to counter the __ discount.
A retrenchment
B spin-off
C liquidation
D retracement
E diversification

Solution
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Answer

E diversification Explanation 1. Identify the context of "discount" The term "discount" in finance often refers to a reduction in value or price, typically associated with underperformance or undervaluation. 2. Match terms with financial strategies Divestment is a strategy used to counteract undervaluation by selling off parts of a company. This aligns with addressing a "diversification discount," where diversified firms are valued less than the sum of their parts.

Explanation

1. Identify the context of "discount"<br /> The term "discount" in finance often refers to a reduction in value or price, typically associated with underperformance or undervaluation.<br />2. Match terms with financial strategies<br /> Divestment is a strategy used to counteract undervaluation by selling off parts of a company. This aligns with addressing a "diversification discount," where diversified firms are valued less than the sum of their parts.
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