Series 79 practice questionmediumAdvanced Financial Analysis
When performing an accretion/dilution analysis, which of the following adjustments is most critical to ensure accuracy in the pro forma income statement?
- AAdjusting for changes in capex assumptions
- BIncorporating transaction-related synergies
- CAccounting for incremental interest expense from new debt✓ Correct answer
- DNormalizing for inflation in operating expenses
Explanation
Why C — Accounting for incremental interest expense from new debt
Incremental interest expense from new debt must be included to properly reflect the impact of deal financing on net income and EPS. Ignoring this leads to overstated accretion, a common analytical pitfall.
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