An Investor Is Analyzing Two Firms in the Same Industry

Multiple Choice

An investor is analyzing two firms in the same industry which are basically identical.She is looking for long-term performance from her investment.Both firms are undergoing restructuring.One firm is involved in substantial downsizing, and the other firm is undertaking aggressive downscoping.The investor should invest in the:

A) downscoping firm because the higher debt load will discipline managers to act in shareholders' best interests.
B) downscoping firm because this will cause the firm to refocus on its core business.
C) downsizing firm because it will be making decisions based on tactical strategies.
D) downsizing firm because it is eliminating employees who are essentially "dead weight" and are dragging down the firm's profitability.