A Popular Financial Strategy in Which a Company Is Acquired

question 51

Multiple Choice

A popular financial strategy in which a company is acquired in a transaction financed largely by debt and eventually paid with money generated from the acquired company's operations or by sale of its assets is

• A) illegal in most countries.
• B) a good way to build a core competency.
• C) an application of the capital asset pricing model.
• D) the leveraged buyout.
• E) an example of internal financing.

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Definitions:

Multiple-Step Statement

An income statement that shows numerous steps to arrive at net income, including gross profit, operating income, and other income and expenses.

Single-Step Statement

An income statement format that calculates net income or loss using a single subtraction of total expenses from total revenues.

Net Income

The total profit of a company after accounting for all expenses and taxes; the bottom line of the income statement.

Income from Operations

The profit realized from a business's core operating activities, excluding revenue from investments and other non-operational sources.