When a company with a higher price-earnings (P/E) ratio acquires a company with a lower P/E ratio in a stock-for-stock transaction accounted for as a pooling-of-interests, the earnings per share of the acquiring company will increase.

Question

Quizplus · Accepted Answer

The acquiring company's earnings per share will increase because the lower P/E ratio of the acquired company means that it is acquiring more earnings for each share of its own stock issued.

When a Company with a Higher Price-Earnings (P/E) Ratio Acquires