Which of the Following Statements Is FALSE

question 56

Multiple Choice

Which of the following statements is FALSE?

• A)The method of payment (cash or stock)affects how the value of the target's assets is recorded for tax purposes and it affects the combined firm's financial statements for financial reporting.
• B)The combined firm must mark up the value assigned to the target's assets on the financial statements by allocating the purchase price to target assets according to their fair market value.
• C)Any goodwill created in a merger deal can be amortized for tax purposes over 15 years.
• D)Many transactions are carried out as acquisitive reorganizations under the tax code.These structures allow the target shareholders to defer their tax liability on the part of the payment made in acquirer stock but they do not allow the acquirer to step up the book value of the target assets.

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Definitions:

Financial Risk Management

The practice of protecting economic value in a firm by using financial instruments to manage exposure to risk.

Hedging

Hedging is an investment strategy used to minimize the risk of adverse price movements in an asset, typically by taking an offsetting position in a related security.

Risk Profile

An evaluation of an individual or organization's willingness and ability to take risks, often influencing investment choices.

Troy Ounces

A troy ounce is a unit of imperial measure, commonly used to gauge the weight of precious metals such as gold and silver, where one troy ounce is equivalent to approximately 31.1 grams.