Question
Apple Company is considering an acquisition and has identified Orange Company as one of three potential takeover targets. All the target entities are highly geared.
Apple Company is considering an acquisition and has identified Orange Company as one of three potential takeover targets. All the target entities are highly geared. However Orange Company is currently the most favorable target as it has the highest level of interest cover. The finance director has indicated, however, that Orange Company operates overseas in a country experiencing hyperinflation. Analyze why Orange Companys financial statements may be an unreliable source for assessing its ability to cover interest payments and service its liabilities.
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