Which Statement Best Describes Mergers

question 65

Multiple Choice

Which statement best describes mergers?

• A)Tax considerations often play a part in mergers. If one firm has excess cash, purchasing another firm exposes the purchasing firm to additional taxes. Thus, firms with excess cash rarely undertake mergers.
• B)The smaller the synergistic benefits of a particular merger, the greater the scope for striking a bargain in negotiations, and the higher the probability that the merger will be completed.
• C)Since mergers are frequently financed by debt rather than equity, a lower cost of debt or a greater debt capacity are rarely relevant considerations when considering a merger.
• D)Managers who purchase other firms often assert that the new combined firm will enjoy benefits from diversification, including more stable earnings. However, since shareholders are free to diversify their own holdings, and at what's probably a lower cost, diversification benefits are generally not a valid motive for a publicly held firm.

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Definitions:

Cognitive Development

The growth and change in intellectual capabilities such as thinking, reasoning, and problem-solving, occurring throughout a person’s lifespan.

Memory Improvement

Techniques or strategies aimed at enhancing an individual's ability to remember information.

Cognitive Therapies

A form of psychotherapy that focuses on changing faulty or distorted thinking patterns, beliefs, and attitudes to improve emotional and behavioral problems.

Metacognitive Skill

This refers to the ability to think about one's own thinking processes and strategies, and to adjust them accordingly for more effective problem solving and learning.