Mergers That Attempt to Bootstrap Earnings May Obtain Increased Current

question 1

Multiple Choice

Mergers that attempt to bootstrap earnings may obtain increased current earnings per share at the expense of:

• A) a higher price-earnings ratio.
• B) higher total combined market value.
• C) reduced future growth prospects.
• D) increased free cash flow.

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Definitions:

Common Stock

Shares entitling their holders to dividends that vary in amount and may even be missed, depending on the fortunes of the company.

Fair Value

A financial accounting term referring to the estimated market value of an asset, liability, or company.

Par Value

The nominal or face value of a bond, stock, or other financial instrument, originally intended to be the minimum price at which the securities could be sold.

Consolidated Cash

The total amount of cash held by a parent company and its subsidiaries, presented as a single figure in consolidated financial statements.