Which of the following is not a potential benefit of a merger?
A) Improved Financing Posture
B) Portfolio Effect
C) Dilution of Earnings Per Share
D) Tax Loss Carryforward

Question

Quizplus · Accepted Answer

Dilution of earnings per share is not a potential benefit of a merger. In fact, it is a potential negative impact because it occurs when the post-merger company has more outstanding shares, leading to a decrease in the earnings per share of existing shareholders. The other options, improved financing posture, portfolio effect, and tax loss carryforward, are potential benefits of a merger. Improved financing posture can occur when the merged company has better access to capital at lower costs than before. Portfolio effect can result in more diversified revenue streams and risk reduction. Finally, tax loss carryforward can reduce the merged company's tax liability by offsetting current or future taxable income with prior tax losses.

Which of the Following Is Not a Potential Benefit of a Merger