Answered: What are some factors thatmight lead to…

Accounting Information Systems

10th Edition

ISBN:9781337619202

Author:Hall, James A.

Publisher:Hall, James A.

Chapter16: Auditing It Controls Part Iii: Systems Development, Program Changes, And Application Auditing

Section: Chapter Questions

Problem 8RQ: What is the importance of the SPL?

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Question

What are some factors that
might lead to synergy?

Expert Solution

Step 1

Introduction:

When two companies combine and raise the valuation of the new firms and thereby support all firms’ shareholders, it is known as synergy. Two companies A and B for example, combine to form business C. If the C’s value is greater than A and B values, then we call it synergy.

Step 2

Answer:

Factors which could result in synergies are:

Operational economies: Where the integration results in economies of scale in the company’s distribution, administration or output and therefore decreases costs or raises earnings.

Financial economies: The result of merger results in lower transaction costs leading to financial economies.

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