When the net income of the combined companies after merger exceeds the sum of the net incomes prior to the merger, ____ is said to exist.
A) goodwill
B) synergy
C) leverage
D) greenmail

Question

Quizplus · Accepted Answer

Synergy is the term used to describe the increase in value created by the combination of two companies that results in improved financial performance and increased efficiency. When the net income after the merger is greater than the sum of the net incomes prior to the merger, it is known as "synergy" and is a positive outcome of the merger. Goodwill refers to the intangible value of a company, leverage refers to the use of debt to finance operations, and greenmail refers to the practice of buying stock in a company in order to force a buyout at a higher price.

When the Net Income of the Combined Companies After Merger