Series 79 practice questionhardAdvanced Financial Analysis
Which situation is most likely to warrant a detailed pro forma balance sheet adjustment during a merger analysis?
- AMinor changes in D&A expense
- BNo change in capital structure
- CUnchanged working capital policies
- DAcquisition fair-value adjustments✓ Correct answer
Explanation
Why D — Acquisition fair-value adjustments
Acquisition accounting often requires significant adjustments to asset and liability values, impacting pro forma financials. Overlooking this can produce misleading post-transaction analysis and ratios.
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