The Reduction of Risk Resulting from Combining Firms with Differing

question 28

Multiple Choice

The reduction of risk resulting from combining firms with differing seasonal or cyclical patterns ofsales or earnings is a key benefit of

• A) vertical merger.
• B) congeneric merger.
• C) conglomerate merger.
• D) horizontal merger.

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Definitions:

Taxes

Mandatory financial charges or levies imposed by a government on individuals and organizations to fund public expenditures.

Profitability Index

A financial tool that calculates the relative profitability of an investment by dividing the present value of future cash flows by the initial investment cost.

Initial Investment

The initial amount of money invested in a project or business venture.

CCA Rate

Refers to Capital Cost Allowance rate, which is the rate at which a business can claim tax depreciation on certain properties or equipment in Canada.