Future Business Leaders of America (FBLA) Business Management Practice Test

Disable ads (and more) with a membership for a one time $4.99 payment

Get ready for the FBLA Business Management Test. Prepare with interactive flashcards and multiple choice questions, each designed with hints and explanations. Excel in your exam!

Practice this question and more.

What is one reason companies may diversify their markets?

To improve employee morale
To offset financial risks
To reduce production costs
To decrease market competition

The correct answer is: To offset financial risks

Diversifying markets is a strategic decision that companies often make to mitigate financial risks associated with relying too heavily on a single market or product line. By expanding into different markets, a company can spread its investments and revenue streams across multiple areas. This can help protect the business from fluctuations in demand or economic downturns that could adversely affect a singular market. When a company diversifies, if one market experiences a downturn or unforeseen challenges, other markets may continue to thrive, thereby providing a buffer against losses. This stability can enhance overall financial health and reduce the likelihood of severe financial distress. Companies often look to diversify to create a more resilient business framework that can adapt to changes in the economic landscape, reducing volatility and improving long-term sustainability.