The portfolio effect in a merger has to do with
A) increasing EPS.
B) reducing risk.
C) creating tax advantages.
D) writing off goodwill.

Question

Quizplus · Accepted Answer

The portfolio effect in a merger refers to the reduction of risk that results from combining two companies. By diversifying their product lines, customer bases, and other factors, the new company can better withstand market fluctuations or other challenges that may have affected either company on its own. The other choices (increasing EPS, creating tax advantages, and writing off goodwill) may also be factors in a merger but do not specifically relate to the portfolio effect.

The Portfolio Effect in a Merger Has to Do with