Question 12.C-R-Q.3: When a business demerges part of its operations, it becomes ...

By becoming smaller and less well resourced, the business may suffer from:

■ greater vulnerability to the risk of takeover from larger businesses
■ a lower profile and reduced market standing
■ a reduced ability to borrow and/or an increase in the cost of borrowing
■ fewer opportunities to benefit from economies of scale through bulk buying, shared administration functions and so on