Future Business Leaders of America (FBLA) Business Law Practice Exam

Which term describes when one corporation agrees to purchase the assets of another corporation?

1. Asset acquisition

2. Stock purchase

3. Merger agreement

4. Equity transfer

The correct answer is: Asset acquisition

The term that accurately describes the situation where one corporation agrees to purchase the assets of another corporation is "asset acquisition." In this process, the acquiring company takes ownership of the target company's assets, which can include physical assets like equipment and buildings, as well as intangible assets such as patents and trademarks. This type of transaction allows the buyer to directly control specific assets without assuming the liabilities of the entire corporation unless specifically negotiated. In contrast, a stock purchase involves one corporation buying the shares of another, which typically results in the acquiring company obtaining not just the assets but also the liabilities of the target firm. A merger agreement refers to a situation where two corporations combine to form a new entity, which is different from simply purchasing assets. Lastly, an equity transfer generally pertains to the transfer of ownership rights in a company, which can involve various forms of transactions but does not specifically focus on the acquisition of assets as the primary action.