Why Is It Stated That the Safest Way of Evaluating

question 71

Essay

Why is it stated that the safest way of evaluating the potential gains from a merger is to focus on changes in cash flow that will transpire as a result of the merger?

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Definitions:

Product Cost Method

A costing technique used to determine the expense associated with producing a product, including direct labor, materials, and overhead.

Selling Expenses

Costs incurred directly and indirectly in making sales, including salaries, commission, advertising, and promotional materials.

Administrative Expenses

Operating expenses not directly tied to the production of goods or services, such as salaries of administrative staff, office supplies, and utilities.

Contribution Margin

The amount by which sales revenue exceeds variable costs. It represents the portion of sales that helps to cover fixed costs.