Which of the following statements correctly describes the link between acquisitions and their impact on the earnings
Question:
Which of the following statements correctly describes the link between acquisitions and their impact on the earnings per share of the bidding company?
a) By acquiring a target with a lower P/E ratio, bidding firms might be able to increase their earnings per share – even in the absence of any synergistic benefits.
b) By acquiring a target with a lower P/E ratio, bidding firms might be able to increase their earnings per share – but with no real impact on the value of their shares.
c) By acquiring a target with a lower P/E ratio, the P/E ratio of the combined company will be the weighted average of the pre-acquisition P/E ratios of the bidder and target companies.
d) None of the above statements are correct.
e) More than one of the above statements are correct.
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain