Which one of the following statements is correct?
A) If an acquisition is made with cash, then the cost of that acquisition is dependent upon the acquisition gains.
B) Acquisitions made by exchanging shares of stock are normally taxable transactions.
C) The management of an acquiring firm may put itself at risk of losing control of the firm if they make acquisitions using shares of stock.
D) The stockholders of the acquiring firm will be better off when an acquisition results in losses if the acquisition was made with cash rather than with stock.
E) Acquisitions based on legitimate business purposes are not taxable transactions regardless of the means of financing used.

Question

Quizplus · Accepted Answer

When acquisitions are made using shares of stock, the existing shareholders of the acquiring firm may experience dilution of their ownership, potentially leading to a loss of control if a significant number of shares are issued.

Which One of the Following Statements Is Correct