Which One of the Following Statements Is Correct

question 291

Multiple Choice

Which one of the following statements is correct?

• A) Acquiring firms tend to avoid firms with large net operating losses when they are seeking a target firm to acquire.
• B) If an acquisition increases the debt level of a firm the tax liability of the firm tends to increase as a result.
• C) If either an increase or a decrease in the level of production causes the average cost per unit to increase the firm is currently operating at its optimal size.
• D) Firms can always benefit from economies of scale if they increase the size of their firm through acquisitions.
• E) If a firm uses its surplus cash to acquire another firm the shareholders of the acquiring firm immediately incur a tax liability related to the transaction.

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Definitions:

Average Variable Costs

The total variable costs of production divided by the quantity of output produced.

Demand Changes

Variations in the desire or need for a product or service, influenced by factors like price, income levels, and consumer preferences.

Price

The value that must be exchanged to obtain a good or service.

Quantity

Quantity refers to the amount or number of a material or immaterial good or service.