Question

What is ‘Share swap’?
A. A business takeover in which acquiring company uses its own stock to pay for the acquired
company.
B. When a company uses its own share to get some short term loan for working capital requirement
C. When companies are require to float a new issue to earn capital for their expansion programmes,
each shareholder gets some additional preferential share. The process is known as Share Swap.

• A. Only A
• B. Only A and B
• C. Only C
• D. None of the above

Answer 1

The Correct Option is A

A 'Share swap' refers to a business takeover strategy wherein the acquiring company uses its own stock to pay for the acquired company. This approach is often utilized when the acquiring company wishes to minimize cash outflow and instead leverages its stock as a currency to facilitate the acquisition. The correct definition and option corresponding to this description is:

Option: Only A

The other options provided do not correctly define 'Share swap.'

• Option B suggests using shares for short-term loans, while 'Share swap' does not generally imply such transactions.
• Option C refers to issuing additional preferential shares during expansion, which does not align with the common definition of 'Share swap.'