Explain one reason diversification might be pursued?

Explain one reason diversification might be pursued?

• A. It increases dependence on the construction market.
• B. It guarantees immediate profits from new markets.
• C. Diversification can reduce risk because the company will not depend only on the construction industry for revenue.
• D. It makes working hours shorter.

Answer: (C)

Diversification spreads risk by broadening where revenue comes from, so the business isn’t tied to one sector. If the company relies mainly on construction and that industry takes a downturn, profits can drop sharply. By adding products, services, or markets outside construction, the firm gains revenue from other areas that may perform differently, helping overall earnings stay steadier across economic cycles. It’s about reducing exposure to sector-specific volatility rather than guaranteeing quick profits or shortening work hours.

Diversification spreads risk by broadening where revenue comes from, so the business isn’t tied to one sector. If the company relies mainly on construction and that industry takes a downturn, profits can drop sharply. By adding products, services, or markets outside construction, the firm gains revenue from other areas that may perform differently, helping overall earnings stay steadier across economic cycles. It’s about reducing exposure to sector-specific volatility rather than guaranteeing quick profits or shortening work hours.