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One of the effects of a merger that can easily mislead investors into overvaluing a firm is the:
A) Appearance of earnings per share growth when no such growth exists.
B) Change in the number of shares outstanding in an all cash merger.
C) Increase in total assets as a result of goodwill recognition under the pooling of interest accounting system.
D) Change in the total value of a firm under the pooling of interest accounting system.
E) Increase in cash flows due to the additional leverage required to fund the acquisition.
Earnings per Share Growth
An increase in the amount of net income earned per share of stock over a specified period, indicating a company's profitability.
Goodwill Recognition
The accounting process of recording the value of intangible assets acquired through a business combination.
Pooling of Interest
An accounting method for mergers and acquisitions where the assets and liabilities of the combining companies are aggregated.
- Assess the impact of mergers and acquisitions on the value for shareholders.
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Learning Objectives
- Assess the impact of mergers and acquisitions on the value for shareholders.
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