Question

Directions: Read the passage carefully and answer the questions given beside.
Paragraph 1: When you are the chief executive of a public company, the temptation to opt for a merger or acquisition is great indeed. Many such bosses may get a call every week or so from an investment banker eager to offer the kind of deal that is sure to boost profits. Plenty of those calls are proving fruitful. In the first three quarters of 2017, just over $2.5trn-worth of transactions were agreed globally, according to Dealogic, a data provider. The total was virtually unchanged from the same period in 2016, but the number in Europe, the Middle East and Africa was up by 21%.
Paragraph 2: It is easy to understand why an executive opts for a deal. Buying another business looks like decisive action, and is a lot easier than coming up with a new, bestselling product. Furthermore, being the acquirer is far more appealing than being the prey; better to be the butcher than the cattle. A takeover may keep activist hedge funds off the management’s back for a while longer. And being in charge of a much bigger company is a more demanding task that will surely justify a larger salary for the executives in charge.
Paragraph 3: But these temptations, good and bad, should generally be resisted. S&P Global Market Intelligence, a research arm of the ratings agency, has updated a study on the impact of deals on the acquiring company’s share price. The study looked at M&A deals done by listed companies in America’s Russell 3000 index between January 2001 and August 2017; deals were only included if they cost more than 5% of the total enterprise value of the acquirer (5% of the equity value, for financial companies). The acquirers’ shares underperformed the market and those of rival firms in the same industry
Paragraph 4: That share-price performance was understandable, in the light of what tended to happen to the fundamentals of the acquiring company’s business. The study finds that, relative to the company’s peer group, net profit margins fall, as do the returns on capital and on equity; earnings per share grow less quickly; and both debt and interest expenses increase. As the deal is done, however, the executives always sound bullish. Costs will be cut, the companies will benefit from selling a wide range of products and so on; a whole range of “synergies” will be achieved. Instead, the combined companies tend to suffer from clashes of culture and teething problems as systems prove hard to integrate. The AOL-Time Warner merger of 2000 is perhaps the most famous example of a dysfunctional deal; at the time, it was one of the biggest mergers in corporate history. Not every deal is that bad. But instead of two plus two equaling the promised five, all too often they add up to three-and-a-half.
What is the tone of the author in the passage?

• A. Sarcastic
• B. Witty
• C. Explanatory
• D. Positive

Answer 1

The Correct Option is C

The tone of a passage refers to the author's attitude towards the subject matter or audience. To determine the tone in this passage, we should analyze the language and style used by the author.

The passage provides information about mergers and acquisitions, presenting both the allure and the potential negative consequences. The author mentions statistics, provides reasons why executives might pursue mergers, and evaluates the outcomes, highlighting various aspects regarding net profit margins, debt, interest expenses, and integration challenges.

Throughout the passage, the author maintains a factual and informative approach. By discussing data from sources and explaining the reasons behind executives' decisions and potential pitfalls, the author adopts a neutral stance without injecting personal bias or emotion.

Considering this comprehensive exploration of mergers and acquisitions, the passage's tone is best described as Explanatory. The author is focusing on explaining the phenomena and outcomes in a detailed and objective manner.