Suppose that Company 1 and Company 2 have the same financial statements and that they are both attempting to acquire a third company (by issuing shares). Company 1 accounts for business combinations using acquisition method of accounting and amortises goodwill over a period of 10 years. Company 2 utilises pooling interest method. How would the financial ratios of these 2 firms differ should they be ssuccessful in conducting the acquisition, assuming that the price paid for the third company significantly exceeds both its book value and current market price? Which ratios would be unaffected?
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