A Likely Reason for a Larger,listed Company to Acquire a Smaller,unlisted

question 18

Multiple Choice

A likely reason for a larger,listed company to acquire a smaller,unlisted company is that:

• A)the smaller company is undervalued.
• B)smaller companies are associated with greater tax benefits.
• C)the management of the smaller company may lack expertise in some areas.
• D)smaller companies tend to have excess liquidity.

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Definitions:

Numerical Terms

Mathematical expressions or figures used to describe quantity, order, or relationships between amounts in data or calculations.

Sensitive

Quick to detect or respond to slight changes, signals, or influences.

Sunk Cost

A cost that has already been incurred and cannot be recovered.

Differential Cost

The difference in cost between two alternative decisions or scenarios, important in the process of making financial decisions.