Final answer:
The term 'differential' in business pertains to the difference between the consideration exchanged and the book value of net identifiable assets in an acquisition. The correct observation is that it's the excess of consideration exchanged over the book value of these assets.
Step-by-step explanation:
The term differential in a business context often refers to the difference between two financial figures in the process of mergers or acquisitions. Specifically, it may refer to the difference between the amount paid for an acquisition over and above the book value of the company's net identifiable assets.
Looking at the options provided:
- A) Excess of consideration exchanged over fair value of net identifiable assets.
- B) Excess of fair value over book value of net identifiable assets.
- C) Excess of consideration exchanged over book value of net identifiable assets.
- D) Excess of fair value over historical cost of net identifiable assets.
The correct observation is C) Excess of consideration exchanged over book value of net identifiable assets. This is because 'consideration exchanged' typically refers to the amount paid by the buyer in the transaction, while 'book value of net identifiable assets' refers to the value of the company's assets as recorded on their financial statements.