Which one of the following statements is correct?
A)If an acquisition is made with cash then the cost of that acquisition is dependent upon the
Acquisition gains.
B)Acquisitions made by exchanging shares of equity are normally taxable transactions.
C)The management of an acquiring ﬁrm may put itself at risk of losing control of the ﬁrm if
They make acquisitions using shares of equity.
D)The equityholders of the acquiring ﬁrm will be better off when an acquisition results in
Losses if the acquisition was made with cash rather than with equity.
E)Acquisitions based on legitimate business purposes are not taxable transactions
Regardless of the means of ﬁnancing used.

Question

Quizplus · Accepted Answer

C) The management of an acquiring firm may indeed put itself at risk of losing control if they use shares of equity for acquisitions. This is because issuing new shares can dilute the ownership percentage of existing shareholders, including the management team, potentially altering control dynamics.

Which One of the Following Statements Is Correct