Which of the Following Statements Concerning Acquisitions Are Correct

question 21

Multiple Choice

Which of the following statements concerning acquisitions are correct?
I. Being acquired by another firm is an effective method of replacing senior management.
II. The net present value of an acquisition should have no bearing on whether or not the acquisition occurs.
III. Acquisitions are often relatively complex from an accounting and tax point of view.
IV. The value of a strategic fit is easy to estimate using discounted cash flow analysis.

• A) I and III only
• B) II and IV only
• C) I and IV only
• D) I, III, and IV only
• E) I, II, III, and IV

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Definitions:

Contra-Revenue Accounts

Accounts that are used to record reductions in gross revenue, such as sales returns and allowances, and discounts.

Sales Discount

A reduction in price given by a seller to a buyer, often to encourage prompt payment.

Sales Tax Payable

A liability account used to keep track of sales tax that has been collected from customers but not yet remitted to the government.

Discount Period

The timeframe during which a discount is offered for the early payment of an invoice or a bill, encouraging quicker payment.