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Exam Code: CIPP-A
Exam Name: Certified Information Privacy Professional/Asia (CIPP/A)
Certification Provider: IAPP
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NEW QUESTION: 1
Which of the following is a reason for a firm to remain in an industry despite poor profits?
A. Economies of scale are not significant.
B. Lack of vertical integration.
C. Distribution channels are willing to accept new products.
D. The firm's assets have a low liquidation value.
Specialized assets and inventory in a declining industry may have a low liquidation value. Few purchasers who wish to operate in the same industry may be available. Durable
assets may have a carrying amount far greater than the liquidation value. Hence, liquidation may result in a loss that the firm may not wish to recognize. Furthermore, a low liquidation value means that the future discounted cash flows from remaining in the industry may exceed the opportunity cost of the capital invested in the declining industry. Thus, the returns from the proceeds of liquidation may be less than the returns from keeping those assets in the business.
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