What Is the Market Reaction to a Takeover Announcement

question 48

Multiple Choice

What is the market reaction to a takeover announcement?

• A)The price of the target increases by 15%,while the price of the acquirer decreases by 1%.
• B)The price of the target increases by 15%,while the price of the acquirer increases by 1%.
• C)The price of the target and acquirer both increase by 15%.
• D)The price of the target increases by 1%,while the price of the acquirer increases by 15%.

Apply formulae to determine various financial ratios such as current ratio, acid-test ratio, and debt to equity ratio from balance sheet data.

Evaluate a company's financial health and performance through common size percentages and trend analysis.

Compute and understand the implications of working capital, net income ratio, and earnings per share for a company's financial stability.

Interpret market valuation ratios including price-earnings ratio and analyze their impact on investment decisions.

---

Definitions:

Marginal Cost

The cost incurred by producing one additional unit of a product or service, a crucial concept for optimizing production and determining pricing.

Firm

A business organization, such as a corporation, partnership, or sole proprietorship, which is engaged in the production and distribution of goods or services.

Profit-Maximizing

The process or strategy of adjusting production and sale levels to achieve the highest possible profit with the given resources and market conditions.

MC = MR

This refers to the condition where a firm's marginal cost (MC) is equal to its marginal revenue (MR), often used to determine the profit-maximizing level of output in microeconomic theory.