If the P/E Paid for a Target Company Is Less

question 93

Multiple Choice

If the P/E paid for a target company is less than the P/E of the acquiring company, the effect on the earnings per share of the acquired company will be ________.

• A) positive
• B) neutral
• C) negative
• D) uncorrelated

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Definitions:

Selling and Administrative Expenses

Costs related to selling a product and managing a business, excluding direct production costs.

Standard Cost

A predetermined cost of manufacturing, selling, or any business operation, which is used for budgeting and assessing performance.

Fixed Manufacturing Overhead

Refers to the consistent, non-variable costs associated with manufacturing a product, such as factory lease payments and salaries of permanent staff.

Direct Labor

The wages and other costs for labor that are directly involved in the manufacturing of a product or the provision of a service.