When the Ratio of Exchange in a Merger Is Equal

question 148

Multiple Choice

When the ratio of exchange in a merger is equal to one and both the acquiring and the target companies have the same premerger earnings per share, both the acquiring and the target companies have the same ________.

• A) debt ratio
• B) book value per share
• C) return on equity
• D) P/E ratio

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Definitions:

Owners' Equity

The total value that the owners or shareholders have invested in a company minus any liabilities the company has.

Assets

Resources owned by an individual or business with economic value expected to provide future benefits.

Liabilities

Financial obligations or debts that a company or individual is responsible for repaying.

Accruals

The accounting principle that revenue and expenses are recorded when they are incurred, regardless of when cash is exchanged.