Question

Which of the following are non-tax advantages to a cash acquisition with an acquiring corporation? (Check all that apply.)

A. No additional stock is issued that dilutes the existing earnings per share.
B. Cash is easy to obtain and readily available to the acquiring corporation.
C. Target corporation shareholders do NOT join the acquiring corporation's shareholders.

Answer 1

The non-tax advantages to a cash acquisition with an acquiring corporation are no dilution of earnings per share, easy access to cash, and the target corporation shareholders do not become shareholders of the acquiring corporation.

Step-by-step explanation:

The non-tax advantages to a cash acquisition with an acquiring corporation are:

1. No additional stock is issued that dilutes the existing earnings per share: In a cash acquisition, the acquiring corporation does not issue additional stock, which means the ownership percentage of existing shareholders remains the same. This helps in preserving the earnings per share of the acquiring corporation.
2. Cash is easy to obtain and readily available to the acquiring corporation: Cash is a liquid asset and can be easily accessed by the acquiring corporation. This makes it convenient for the acquiring corporation to finance the acquisition without the need for borrowing or issuing bonds.
3. Target corporation shareholders do NOT join the acquiring corporation's shareholders: In a cash acquisition, the shareholders of the target corporation do not become shareholders of the acquiring corporation. This allows the acquiring corporation to maintain its current shareholder base and ownership structure.