Which of the Following Statements Is Most CORRECT

question 32

Multiple Choice

Which of the following statements is most CORRECT?

• A) A conglomerate merger is one where a firm combines with another firm in the same industry.
• B) Regulations in the United States prohibit acquiring firms from using common stock to purchase another firm.
• C) Defensive mergers are designed to make a company less vulnerable to a takeover.
• D) The equity residual method values a target firm by discounting residual cash flows at the acquiring firm's overall cost of capital reflecting the combined firm's post-merger capital structure.
• E) A financial merger occurs when the operations of the firms involved are integrated in the hope of achieving synergistic benefits.

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Definitions:

Long-Term Investments

Assets that a company intends to hold for more than one year, such as stocks, bonds, or real estate.

Statement of Cash Flows

A financial report detailing the impact of variations in balance sheet accounts and income on cash and cash equivalents.

Direct Method

An accounting method used in the cash flow statement to show the specific sources of operating cash receipts and payments, contrasting with the indirect method.

Investing Activities

Transactions involving the purchase and sale of long-term assets and investments, a component of a company's cash flow statement.