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On average, the market respond more positively_____. a.No answer text provided. b.No answer text provided. c.to...

On average, the market respond more positively_____.

a.No answer text provided.

b.No answer text provided.

c.to cash deals than to stock deals.

d.to stock deals than to cash deals

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Homework Answers

Answer #1

The Correct answer is "Option C"

Cash Deal is made when the company is very much confident about the deal and wants to close it in cash. Issuing stock for a deal dilutes ownership. So if a company is not sure about a deal, then they issue stock as they don't want to use the cash. If the deal is successful then the stock price will increase, if it is not, then there is no fixed liability to shareholders. So stock deal is safe for companies when they are not sure about the outcome of the deal.

This is the reason that market reacts more positively to cash deal than to stock deal. Investors know that company is positive, so they start buying more shares.

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