Question

Firms that are acquired to take advantage of bootstrapping often have: 


A. a lower price-earnings ratio than the acquirer.


B. a higher price-earnings ratio than the acquirer.


C. more outstanding shares than the acquirer.


D. a higher market valuation than the acquirer.

Answer 1

I have answered the question below

Please up vote for the same and thanks!!!

Do reach out in the comments for any queries

Answer:

a lower price-earnings ratio than the acquirer

Generally entrepreneurs who bootstrap their own companies want to take the advantage from the buying company to substantiate their earnings ratio. Thus the new firrm will have a lower ratio to take advantage of the already established firm

Hence Option A

Other options are wrong as the market cap is smaller for new firm and less shares also