Homework Answers
Answer is ------> False
Explanation :
Prima facie it seems that dropping a business segment may lead to increase in profits. But there is need to inquire about the reason that leads a segment unprofitablle. If the reason is high fixed cost which are unavoidable if the segment business is discontinued , may not lead to increase in profits if the unprofitable business is discontinued , as the continuing business has to bear the fixed cost which may lead to decrease in overall profits of business.
Hence it cannot be said that dropping / shutting down a unprofitable business may always lead to increase in profits.
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