An Increase in Earnings Per Share After a Merger May

question 65

Multiple Choice

An increase in earnings per share after a merger may not indicate increased value if the:

• A) number of shares has increased.
• B) price of the acquirer's stock increases.
• C) price-earnings ratios were different in the premerger firms.
• D)firm's additional earnings are spent on legal expenses of the merger.

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Definitions:

Machine Hours

A measure of production time or operation, referring to the total hours a machine is used or operates within a given period.

Overapplied Amount

This term refers to a situation where the allocated or applied costs in cost accounting exceed the actual costs incurred.

Factory Overhead Rate

A cost allocation rate used in manufacturing to assign estimated overhead costs to production activities or output, based on a predetermined formula.

Direct Labor Hours

The total hours worked directly on the production of goods.