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:

Sale

The exchange of goods or services for money or other compensation, forming the primary revenue-generating activity of a business.

Journal Entry

A record in accounting that logs every financial transaction a business makes, showing which accounts are affected and by how much.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was put into use.

Salvage Value

The estimated value that an asset will realize upon its sale at the end of its useful life.