The Risk of Failure of an Acquisition Can Be Reduced

question 90

Multiple Choice

The risk of failure of an acquisition can be reduced by

• A) undervaluing the assets of an acquired firm.
• B) ensuring that firms are acquired in the home country.
• C) replacing high-level managers of an acquired firm.
• D) a detailed auditing of operations, financial position, and management culture.
• E) investing only in a firm that is managing to break even.

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Definitions:

Budgeted Depreciation

An estimate of the depreciation expenses for assets during a specific period as planned in a budget.

Selling and Administrative Expenses

Expenses that are not directly related to the production of goods, including costs related to the selling of products and managing the business.

Merchandise Inventory

Goods a company intends to sell to customers that are considered a current asset on the balance sheet.

Cash Budget

A financial plan that estimates a company's cash inflows and outflows over a specified period, helping in managing liquidity.