A Firm May Be Motivated to Purchase Another Firm Whenever

question 136

Multiple Choice

A firm may be motivated to purchase another firm whenever

• A) The cost to replace the target firm's assets is less than its market value
• B) The replacement cost of the target firm's assets exceeds its market value
• C) When the inflation rate is accelerating
• D) The ratio of the target firm's market value is more than four times its book value
• E) The market to book ratio is greater than one and increasing

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Definitions:

Special Journals

Customized accounting journals used for recording specific types of transactions in detail, such as sales or purchases.

Cash Receipts Journal

An accounting journal specifically for all cash inflows or receipts, including sales, loan proceeds, and interest earned.

Current Asset

Assets that are expected to be converted into cash, sold, or consumed within one year or within the operating cycle of the business, whichever is longer.

LIFO Cost Assumption

The LIFO Cost Assumption is a principle used in the LIFO inventory valuation method, assuming that the most recently acquired items are the first to be sold, impacting the reported income and inventory costs.