Which of the Following Statements Is True

question 63

Multiple Choice

Which of the following statements is true?

• A)When a firm's assets are acquired, the liabilities are transferred to the vendor.
• B)The purchase of a target company's shares as a method of acquiring a firm's assets is attractive when the target company has contingent liabilities outstanding.
• C)With an acquisition, both assets and liabilities are taken over by the new parent.
• D)The purchase of shares must take place soon after the announcement of the intent to merge, thereby minimizing the premium over current market price that has to be paid.

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Definitions:

Common Size Income Statement

A financial statement that presents all items as a percentage of a common base figure, making it easier to analyze changes and compare financial performance over time.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue, indicating financial health.

Return On Assets

A financial metric that measures the profitability of a company in relation to its total assets.

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales by calculating the percentage of revenue that translates into profits.