Which One of the Following Statements Is Correct

question 20

Multiple Choice

Which one of the following statements is correct?

• A)Firms with large net operating losses tend to be acquiring firms rather than target firms.
• B)The leverage associated with an acquisition increases the tax liability of the acquiring firm.
• C)If either an increase or a decrease in the level of production causes the average cost per unit to increase then the firm is currently operating at its optimal production level.
• D)Firms can always benefit from economies of scale if they increase the size of their firm through acquisitions.
• E)If a firm uses it surplus cash to acquire another firm then the shareholders of the acquiring firm immediately incur a tax liability related to the transaction.

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Definitions:

Interim Financial Statements

Periodic financial statements prepared during the fiscal year, providing an update on a company's financial position and performance between annual reports.

Voting Stock

Shares of a corporation's stock that entitle the shareholder to vote on company matters, such as electing directors.

Large Issuers

Refer to entities, often corporations or governments, that issue a significant volume of securities to finance their operations.