Better-Off Testing is a widespread management practice to see if two distinct entrepreneurial activities would be more profitable if you join the same business.
This is a tool for the diversification strategy that top managers use to see if it is convenient to merge two businesses under one administration and if the incremental value that comes from this transaction is enough to cover, among others , the coordination costs.
The Better-Off Test is fundamentally empirical, and is based on the analysis of the peculiarities of the two businesses; therefore it does not have a standardized approach.
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