Which One of the Following Statements Is Correct

question 20

Multiple Choice

Which one of the following statements is correct?

• A)Firms with large net operating losses tend to be acquiring firms rather than target firms.
• B)The leverage associated with an acquisition increases the tax liability of the acquiring firm.
• C)If either an increase or a decrease in the level of production causes the average cost per unit to increase then the firm is currently operating at its optimal production level.
• D)Firms can always benefit from economies of scale if they increase the size of their firm through acquisitions.
• E)If a firm uses it surplus cash to acquire another firm then the shareholders of the acquiring firm immediately incur a tax liability related to the transaction.

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Definitions:

Shortage

A situation where the demand for a product or service exceeds the supply available at a specified price.

Usury Law

Legislation that sets maximum interest rates that can be charged on loans, to prevent excessive interest.

Market Equilibrium

A market state where the quantity supplied equals the quantity demanded, leading to a balance in price and volume.

Interest Rate

The cost of borrowing money expressed as a percentage of the total amount borrowed.