An acquiring firm can increase its earnings per share (EPS)by:
A)Acquiring a firm with a lower P/E ratio than its own P/E ratio.
B)Acquiring a firm with a higher P/E ratio than its own P/E ratio.
C)Acquiring a firm with a higher leverage ratio than its own leverage ratio.
D)Acquiring a firm with a lower leverage ratio than its own leverage ratio.

Question

Quizplus · Accepted Answer

Acquiring a firm with a lower P/E ratio than its own P/E ratio can result in an increase in EPS for the acquiring firm. This is because the acquiring firm is essentially buying the target firm's earnings at a lower price (as reflected in the lower P/E ratio), which can increase the overall earnings and therefore EPS of the acquiring firm.

An Acquiring Firm Can Increase Its Earnings Per Share (EPS)by