Down River Markets Has Decided to Acquire a Controlling Interest

question 59

Multiple Choice

Down River Markets has decided to acquire a controlling interest in Blue Jays by purchasing shares of stock in the public markets.Which of the following statements correctly apply to this acquisition?
I.The purchase of publicly-traded shares may be more expensive than an outright merger with Blue Jays would have been.
II.Down River Markets can avoid dealing with the board of directors of Blue Jays by purchasing shares in this manner.
III.If Down River Markets is successful in acquiring at least 80 percent of the outstanding shares of Blue Jays,the remaining shareholders in Blue Jays will be forced to also sell their shares to Down River Markets.
IV.Whether or not Down River Markets gains control of Blue Jays depends upon the willingness of Blue Jays shareholders to sell their shares.

• A)I and III only
• B)II and IV only
• C)I, II, and IV only
• D)I, II, and III only
• E)I, II, III, and IV

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Definitions:

Operating Activities

Operating activities relate to the primary activities of a business involving the production and delivery of goods and services, and are reflected in the cash flows from operations in financial reporting.

Financing Activities

Transactions with creditors and investors used to fund a company through borrowing or selling equity.

Return on Assets

A financial ratio that indicates how profitable a company is relative to its total assets, measuring how efficiently assets are used to generate profit.

Net Income

The amount of money a corporation earns post all deductions for taxes and expenditures from its income.