If a bank with a higher stock price-to-earnings ratio acquires a bank with a lower price-earnings ratio,earnings per share of the combined organization will increase,even if combined earnings fall after the merger.

Question

Quizplus · Accepted Answer

The earnings per share (EPS) of the combined organization depends on the total earnings and the number of shares outstanding. If combined earnings fall, EPS may decrease regardless of the price-to-earnings ratios of the individual banks.

If a Bank with a Higher Stock Price-To-Earnings Ratio Acquires