Question

A candy company called Hearts Aflame Inc. forms an agreement with
another candy company called Dreamcatcher Inc. Through this
agreement, Hearts Aflame owns 30 percent of Dreamcatcher. However,
Dreamcatcher does not own any part of Hearts Aflame. This type of
agreement is called a(n).
A. non-equity alliance.
B. equity alliance.
C. joint venture.
D. capital venture.

Answer 1

Answer:

The correct option is (B)

Explanation:

A strategic equity alliance is made when one organization buys a specific value level of the other organization. When Candy bought 30% of the value in Dreamcatcher Inc., an equity alliance was formed. In this type of alliance, one company buys ownership of another company, but that other company does not pool in the resources and cannot claim ownership. This type of alliance is commonly done to improve the business cycle and slow growth.