When should a division of a company be abandoned and what will happen if one is

Question

When should a division of a company be abandoned and what will happen if one is abandoned that has a net loss and is expected to continue to have a net loss for the foreseeable future:
A) Should be abandoned if it's division margin is negative
B) Will increase net income for the company if the division is abandoned, only if all other divisions are showing profits
C) Will increase net income for the company if the division is abandoned, only if corporate income is negative
D) Will invariably increase net income for the company if the division is a abandoned When should a division of a company be abandoned and what will happen if one is abandoned that has a net loss and is expected to continue to have a net loss for the foreseeable future:
A) Should be abandoned if it's division margin is negative
B) Will increase net income for the company if the division is abandoned, only if all other divisions are showing profits
C) Will increase net income for the company if the division is abandoned, only if corporate income is negative
D) Will invariably increase net income for the company if the division is a abandoned
A) Should be abandoned if it's division margin is negative
B) Will increase net income for the company if the division is abandoned, only if all other divisions are showing profits
C) Will increase net income for the company if the division is abandoned, only if corporate income is negative
D) Will invariably increase net income for the company if the division is a abandoned

Explanation / Answer

A) Should be abandoned if it's division margin is negative

Even if a division has a net loss, discontinuing the loss making will increase overall income only if the segment margin is negative and all of the direct segment costs can be avoided, which should be possible in the long term future

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