Series 79 practice questionmediumAdvanced Financial Analysis
A company’s pro forma combined EBITDA margin is projected to rise after an acquisition. What is the most likely driver if no revenue synergies are expected?
- ADilution from issuing additional shares
- BIncrease in interest expense
- CHigher capital expenditures
- DCost synergies and expense reductions✓ Correct answer
Explanation
Why D — Cost synergies and expense reductions
Cost synergies and expense reductions improve margins without relying on revenue growth. Mistaking this for revenue synergies or financial leverage would misinterpret the sources of margin expansion.
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