Enumerate the potential drawbacks of divestment, Financial Management

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Potential drawbacks of divestment

- There may be some loss of economies of scale. Fixed overheads would have a lower capacity to recover them.

- Cash generated may not be put to suitable use thereby reducing the returns.

Sell-off is a form of divestment and is sale of part of a company to a third party, generally for cash. It is a good way of raising cash and focussing on core business activities.

 


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