Which of the Following Is the Most Appropriate Reason for an Acquiring

question 110

Multiple Choice

Which of the following is the most appropriate reason for an acquiring firm's shareholders to prefer using stock financing for acquisitions?

• A) There is no cash outflow.
• B) It mitigates the effects of overvaluation of the target firm.
• C) It mitigates the effects of undervaluation of the target firm.
• D) It avoids dilution of shares.

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Definitions:

Accounting Profits

Accounting profits represent the financial gains of a business as calculated by subtracting total explicit costs from total revenues, according to standard accounting practices.

Industry Entry

The act or process of starting a new business or expanding into a new segment within a particular market or industry.

Average Product

The total output produced by a firm divided by the number of inputs used to produce that output.