Some Advantages of Obtaining Control by Acquiring a Controlling Interest

question 34

Multiple Choice

Some advantages of obtaining control by acquiring a controlling interest in stock include all but:​

• A)​Negotiations are made directly with the acquiree's management.
• B)​The legal liability of each corporation is limited to its own assets.
• C)​The cost may be lower since only a controlling interest in the assets, not the total assets, is acquired.
• D)​Tax advantages may result from preservation of the legal entities.

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Definitions:

Common Dividends

Dividends that are paid out to holders of common shares from a company's earnings, often fluctuating with the company's profitability.

Basic Earnings Per Share

A measure of a company's profitability calculated by dividing the net income by the average number of common shares outstanding.

Market Measures

Metrics and indices used to assess and compare the performance, risk, and valuation of stocks or securities within the financial market.

Price-Earnings

A ratio used to evaluate a company's stock price relative to its per-share earnings, indicating the value that investors put on a company's earning power.