Asked by Michelle Rebollar on Jul 28, 2024
Verified
Which of the following is not a reason why a private enterprise may be acquired as a bargain purchase?
A) It is a family business and the next generation does not want to continue the business.
B) The owner has health problems and does not have a successor.
C) The business only has equity financing and has no debt financing.
D) The owner is no longer interested in the business.
Bargain Purchase
A scenario in which a company acquires another company for a price less than the fair market value of its net assets.
Equity Financing
Raising capital through the sale of shares in a company, resulting in new shareholders and diluting the ownership stake of existing shareholders.
- Examine the legal, financial, and strategic aspects of business consolidations and their consequences on financial statements.
Verified Answer
CN
Chizoba NnakweAug 01, 2024
Final Answer :
C
Explanation :
The presence or absence of debt financing does not usually affect whether a private enterprise is acquired as a bargain purchase. The other options (A, B, and D) all suggest situations where the current owner is motivated to sell the business at a lower price, which could make it a bargain for the buyer.
Learning Objectives
- Examine the legal, financial, and strategic aspects of business consolidations and their consequences on financial statements.
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