One of the Effects of a Merger That Can Easily

question 154

Multiple Choice

One of the effects of a merger that can easily mislead investors into overvaluing a firm is the:

• A) Appearance of earnings per share growth when no such growth exists.
• B) Change in the number of shares outstanding in an all cash merger.
• C) Increase in total assets as a result of goodwill recognition under the pooling of interest accounting system.
• D) Change in the total value of a firm under the pooling of interest accounting system.
• E) Increase in cash flows due to the additional leverage required to fund the acquisition.

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Definitions:

Credit Sales

Sales made by a business where the customer is allowed to pay at a later date, as opposed to immediate cash transactions.

Cash Received

The total amount of cash received by a business during a specific period, from various sources like sales, investments, or financing.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly used to create the product.

Budget Committee

A group responsible for developing and monitoring an organization's financial plan, including income and expenditures.