When an Acquiring Firm Bypasses Current Management and Makes a Direct

question 15

Multiple Choice

When an acquiring firm bypasses current management and makes a direct offer to purchase shares from the shareholders, this action is termed a:

• A)Leveraged buy-out
• B)Hostile takeover
• C)Tender offer
• D)Corporate buy-out

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Definitions:

Equity Method

An accounting method used to assess the profits earned by investments in other companies, where the investment is recorded at cost and adjusted according to the investor's share of the investee's profit or loss.

Fair Value Option

The fair value option is an accounting choice that allows companies to record certain financial assets and liabilities at their fair market value to provide a more relevant measurement of their financial position.

Unrealized Gains

Increases in the value of an investment that have not been realized through a sale and thus are not reflected in the entity's income.

Goodwill

An intangible asset representing the excess value of a business beyond its physical assets and liabilities, often arising from brand reputation, customer relationships, or intellectual property.