Which One of the Following Is the Most Appropriate Reason

question 48

Multiple Choice

Which one 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.

---

Definitions:

Purchases On Account

Transactions where goods are bought and payment is deferred to a later date, often resulting in an accounts payable.

Accounts Payable Balance

The total amount of money a company owes to its suppliers or creditors for goods and services purchased on credit.

Unearned Revenue

Income received by a business for goods or services yet to be delivered or provided; also known as deferred revenue.

Prepaid Expense

Payments made beforehand for products or services that will be provided at a later date.