Which One of the Following Statements Is Correct

question 313

Multiple Choice

Which one of the following statements is correct?

• A) Acquiring firms tend to avoid firms with large net operating losses when they are seeking a target firm to acquire.
• B) If an acquisition increases the debt level of a firm the tax liability of the firm tends to increase as a result.
• C) If either an increase or a decrease in the level of production causes the average cost per unit to increase the firm is currently operating at its optimal size.
• D) Firms can always benefit from economies of scale if they increase the size of their firm through acquisitions.
• E) If a firm uses its surplus cash to acquire another firm the shareholders of the acquiring firm immediately incur a tax liability related to the transaction.

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Definitions:

Repression

In psychodynamic theory, the automatic (unconscious) ejection of anxiety-evoking ideas, impulses, or images from awareness.

Impulses

Sudden, involuntary urges to act, driven by internal or external stimuli.

Defense Mechanism

Unconscious tactics employed to shield oneself from the anxiety caused by thoughts or feelings deemed unacceptable.

Psychic Energy

In psychoanalytic theory, a form of energy that drives all human behavior, originating from innate biological instincts.