Financial Models Are of Little Value in Determining Whether the Proposed

question 68

True/False

Financial models are of little value in determining whether the proposed purchase price can be financed by the acquirer.

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Definitions:

EBIT-EPS Lines

Graphical representations that show the impact of financing choices, especially debt and equity, on a company's earnings per share (EPS) for various levels of earnings before interest and taxes (EBIT).

EPS

Earnings per share; a measure of a company's profitability calculated by dividing its net income by the number of outstanding shares.

EBIT

Earnings Before Interest and Taxes, a profitability measure for companies that doesn't include costs associated with taxes or interest.

Breakeven Diagram

A graphical representation that shows the point at which total cost and total revenue are equal, with no net loss or gain.