Which of the following represent potential gains from an acquisition? I. the replacement of ineffective managers
II) lower costs per unit produced
III) an increase in ﬁrm size so that diseconomies of scale are realized
IV) spreading of overhead costs
A)II and III only.
B)I and IV only.
C)I, II, and IV only.
D)I, III, and IV only.
E)I, II, III, and IV.

Question

Quizplus · Accepted Answer

I and IV represent potential gains from an acquisition. The replacement of ineffective managers can lead to better management and decision-making, resulting in increased profitability. Spreading of overhead costs can occur as the acquiring company usually has resources and systems in place that the acquired company can benefit from. Additionally, if the acquisition results in lower costs per unit produced, the acquiring company can achieve economies of scale, resulting in increased profitability. However, an increase in firm size may lead to diseconomies of scale, which could lead to a decrease in profitability. Therefore, III is not a potential gain from an acquisition.

Which of the Following Represent Potential Gains from an Acquisition