Which of the Following Statements Is Most CORRECT

question 32

Multiple Choice

Which of the following statements is most CORRECT?

• A) A conglomerate merger is one where a firm combines with another firm in the same industry.
• B) Regulations in the United States prohibit acquiring firms from using common stock to purchase another firm.
• C) Defensive mergers are designed to make a company less vulnerable to a takeover.
• D) The equity residual method values a target firm by discounting residual cash flows at the acquiring firm's overall cost of capital reflecting the combined firm's post-merger capital structure.
• E) A financial merger occurs when the operations of the firms involved are integrated in the hope of achieving synergistic benefits.

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Definitions:

Sarbanes-Oxley Act

A U.S. law enacted in 2002 aimed at protecting investors from fraudulent accounting activities by corporations.

Top Executives

Senior-level managers and officers in an organization who are responsible for overseeing its strategic direction and making high-level decisions.

Clan Control

A method of managing based on shared values, beliefs, norms, and traditions among company members, which influences members' behaviors and contributes to organizational culture.

Organizational Culture

The shared values, beliefs, and practices that shape the social and psychological environment of an organization.