Which of the Following Statements Is Not a Reason a Company

question 78

Multiple Choice

Which of the following statements is not a reason a company may purchase another company's stock?

• A) earning a return on excess cash
• B) sustaining the other company's stock price
• C) gaining control of another company's operations
• D) developing or maintaining business relationships

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Definitions:

Conglomerate Merger

Occurs when unrelated enterprises combine, such as Mobil Oil and Montgomery Ward.

Horizontal

Term often used in analysis to indicate a flat or level condition, such as a horizontal merger, which occurs between companies in the same industry.

Vertical Business Relationship

A business model where a company is involved in multiple stages of the production process, from raw material to final product, often through acquisitions or partnerships.

Financial Synergy

The potential increase in value and performance of two companies when they are merged, due to various factors like cost savings or revenue enhancement.