The Motivation of a Parent Company to Purchase the Outstanding

question 37

Multiple Choice

The motivation of a parent company to purchase the outstanding bonds of a subsidiary could be to:

• A)​replace the existing debt with new debt at a lower interest rate.
• B)​reduce the parent company's acquisition price for the subsidiary.
• C)​increase the parent company's ownership percentage in the subsidiary.
• D)​create interest revenue to offset interest expense in future income statements.

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Definitions:

Health Care Costs

The total expenditures for services and products related to the treatment and prevention of disease or the maintenance of health.

Overallocation

A situation where resources are allocated in excess to a particular good or service, often leading to inefficiency and waste.

Resources

Assets, materials, or substances that are available and valuable in producing goods or providing services.

Externalities

Costs or benefits that affect a party who did not choose to incur that cost or benefit, caused by an economic transaction.