Which one of the following statements is correct?
A) A ﬁrm must realize some synergy as a result of a merger if the earnings per share of the acquiring ﬁrm increase.
B) Any diversiﬁcation achieved through a merger is valued by investors.
C) Any increase in earnings per share due to a merger provides ﬁnancial reasoning for an increase in the stock price per share.
D) Firms with surplus cash need to justify an acquisition as having a business purpose other than the avoidance of a dividend distribution.
E) Diversiﬁcation is one of the greatest beneﬁts derived from an acquisition.

Question

Quizplus · Accepted Answer

Firms with surplus cash need to justify an acquisition as having a business purpose other than the avoidance of a dividend distribution to ensure that the acquisition is in the best interest of shareholders and not just a means to avoid paying dividends.

Which One of the Following Statements Is Correct