Question 1

Cross-border acquisitions are typically made to

Accepted Answer

A)  increase a firm's market power. 
B)  reduce the cost of new product development. 
C)  take advantage of higher education levels of labor in developed countries. 
D)  circumvent barriers to entry in another country. 
A)  increase a firm's market power. 
B)  reduce the cost of new product development. 
C)  take advantage of higher education levels of labor in developed countries. 
D)  circumvent barriers to entry in another country.

Question 2

A major problem with buying other companies in order to gain access to their product lines is that the acquiring firm may lose its own ability to innovate.

Accepted Answer

A) True 
 B)False

Question 3

Claude holds a large number of shares of Bayou Beauty, a regional brewing company that is considered a likely takeover target by a major international brewer. It would probably be in Claude's financial interest if Bayou Beauty's owners

Accepted Answer

A)  resisted selling at any price. 
B)  sold the company to the larger brewer. 
C)  designed a poison pill to discourage a takeover. 
D)  looked for smaller brewers to acquire instead of selling to the larger brewer. 
A)  resisted selling at any price. 
B)  sold the company to the larger brewer. 
C)  designed a poison pill to discourage a takeover. 
D)  looked for smaller brewers to acquire instead of selling to the larger brewer.

Question 4

Junk bonds are financial instruments commonly used to finance risky acquisitions that provide potential high returns for the bondholders.

Accepted Answer

A) True 
 B)False

Question 5

The effect of leverage on an acquiring firm's financial returns is negative and thus should be avoided.

Accepted Answer

A) True 
 B)False

Question 6

A manager in your company is proposing the acquisition of Taylor company, which has developed a new, innovative product. If you were to argue in favor of internal product development as opposed to acquisition, your argument could include all of the following EXCEPT

Accepted Answer

A)  the acquisition of Taylor also entails risks, such as high failure rates. 
B)  Taylor's innovation could become a part of all of your firm's products. 
C)  Taylor may be overrepresenting the innovation. 
D)  acquisitions could become a substitute for innovation within your firm. 
A)  the acquisition of Taylor also entails risks, such as high failure rates. 
B)  Taylor's innovation could become a part of all of your firm's products. 
C)  Taylor may be overrepresenting the innovation. 
D)  acquisitions could become a substitute for innovation within your firm.

Question 7

One problem with becoming too large is that large firms

Accepted Answer

A)  become excessively diverse and have difficulty focusing on strategic goals. 
B)  tend to have inadequate financial controls. 
C)  become attractive takeover targets. 
D)  usually increase bureaucratic controls. 
A)  become excessively diverse and have difficulty focusing on strategic goals. 
B)  tend to have inadequate financial controls. 
C)  become attractive takeover targets. 
D)  usually increase bureaucratic controls.

Question 8

Market power is derived primarily from the

Accepted Answer

A)  core competencies of the firm. 
B)  size of a firm and its resources and capabilities. 
C)  quality of a firm's top management team. 
D)  depth of a firm's strategy. 
A)  core competencies of the firm. 
B)  size of a firm and its resources and capabilities. 
C)  quality of a firm's top management team. 
D)  depth of a firm's strategy.

Question 9

A high level of debt can be a positive force because it allows firms to

Accepted Answer

A)  take advantage of expansion opportunities. 
B)  postpone unnecessary investments. 
C)  invest in tax avoiding ventures. 
D)  discipline their managers. 
A)  take advantage of expansion opportunities. 
B)  postpone unnecessary investments. 
C)  invest in tax avoiding ventures. 
D)  discipline their managers.

Question 10

When a firm acquires its supplier, it is engaging in a(an)

Accepted Answer

A)  merger. 
B)  unrelated acquisition. 
C)  hostile takeover. 
D)  vertical acquisition. 
A)  merger. 
B)  unrelated acquisition. 
C)  hostile takeover. 
D)  vertical acquisition.

Question 11

Due diligence is performed by investment banking firms because of laws protecting shareholders during acquisitions.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is NOT a result of over-diversification?

Accepted Answer

A)  Executives do not have a rich understanding of all of the firm's business units. 
B)  Managers emphasize strategic controls rather than financial controls. 
C)  Firms use acquisition as a substitute for innovation. 
D)  Managers become short-term in their orientation. 
A)  Executives do not have a rich understanding of all of the firm's business units. 
B)  Managers emphasize strategic controls rather than financial controls. 
C)  Firms use acquisition as a substitute for innovation. 
D)  Managers become short-term in their orientation.

Question 13

Researchers have found that shareholders of acquired firms often

Accepted Answer

A)  earn above-average returns. 
B)  earn below-average returns. 
C)  earn close to zero as a result of the acquisition. 
D)  are not affected by the acquisition. 
A)  earn above-average returns. 
B)  earn below-average returns. 
C)  earn close to zero as a result of the acquisition. 
D)  are not affected by the acquisition.

Question 14

Currently, the rationale for making an acquisition includes each of the following EXCEPT

Accepted Answer

A)  to increase market power. 
B)  to decrease taxes paid by shareholders. 
C)  to increase financial performance. 
D)  to shift a core business into different market. 
A)  to increase market power. 
B)  to decrease taxes paid by shareholders. 
C)  to increase financial performance. 
D)  to shift a core business into different market.

Question 15

All of the following statements are correct EXCEPT

Accepted Answer

A)  immediately after the announcement of a planned acquisition, the stock price of the majority of acquiring firms declines. 
B)  shareholders of acquired firms often earn above-average returns from an acquisition. 
C)  the majority of acquisitions increase long-term value for the acquiring firm. 
D)  shareholders of acquiring firms typically earn returns from the transaction that are close to zero. 
A)  immediately after the announcement of a planned acquisition, the stock price of the majority of acquiring firms declines. 
B)  shareholders of acquired firms often earn above-average returns from an acquisition. 
C)  the majority of acquisitions increase long-term value for the acquiring firm. 
D)  shareholders of acquiring firms typically earn returns from the transaction that are close to zero.

Question 16

Evidence suggests that returns to shareholders of acquired firms are greater than those for acquiring firms.

Accepted Answer

A) True 
 B)False

Question 17

Identify and explain the seven reasons firms engage in an acquisition strategy.

Accepted Answer

(1) Increased market power. Market power

Question 18

The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because

Accepted Answer

A)  of barriers to entry in many industries. 
B)  it is difficult and time intensive for companies to develop products that differ from their current product line. 
C)  innovation in both the acquired and the acquiring firm is enhanced by the exchange of competencies resulting from acquisition. 
D)  unrelated acquisitions are usually uncomplicated because the acquired firm is allowed to continue to function independently as it did before acquisition. 
A)  of barriers to entry in many industries. 
B)  it is difficult and time intensive for companies to develop products that differ from their current product line. 
C)  innovation in both the acquired and the acquiring firm is enhanced by the exchange of competencies resulting from acquisition. 
D)  unrelated acquisitions are usually uncomplicated because the acquired firm is allowed to continue to function independently as it did before acquisition.

Question 19

Moon-in-June, a designer and manufacturer of wedding dresses, has decided to purchase a retail chain specializing in bridal wear. This purchase will be useful in gaining more market power for Moon-in-June.

Accepted Answer

A) True 
 B)False

Question 20

GE transformed its scope by acquiring several financial service firms.

Accepted Answer

A) True 
 B)False

Cross-border acquisitions are typically made to

A major problem with buying other companies in order to gain access to their product lines is that the acquiring firm may lose its own ability to innovate.

Claude holds a large number of shares of Bayou Beauty, a regional brewing company that is considered a likely takeover target by a major international brewer. It would probably be in Claude's financial interest if Bayou Beauty's owners

Junk bonds are financial instruments commonly used to finance risky acquisitions that provide potential high returns for the bondholders.

The effect of leverage on an acquiring firm's financial returns is negative and thus should be avoided.

A manager in your company is proposing the acquisition of Taylor company, which has developed a new, innovative product. If you were to argue in favor of internal product development as opposed to acquisition, your argument could include all of the following EXCEPT

One problem with becoming too large is that large firms

Market power is derived primarily from the

A high level of debt can be a positive force because it allows firms to

When a firm acquires its supplier, it is engaging in a(an)

Due diligence is performed by investment banking firms because of laws protecting shareholders during acquisitions.

Which of the following is NOT a result of over-diversification?

Researchers have found that shareholders of acquired firms often

Currently, the rationale for making an acquisition includes each of the following EXCEPT

All of the following statements are correct EXCEPT

Evidence suggests that returns to shareholders of acquired firms are greater than those for acquiring firms.

Identify and explain the seven reasons firms engage in an acquisition strategy.

The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because

Moon-in-June, a designer and manufacturer of wedding dresses, has decided to purchase a retail chain specializing in bridal wear. This purchase will be useful in gaining more market power for Moon-in-June.

GE transformed its scope by acquiring several financial service firms.

Strategic Management and Strategic Competitiveness

The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis

The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

Business-Level Strategy

Competitive Rivalry and Competitive Dynamics

Corporate-Level Strategy

International Strategy

Cooperative Strategy

Corporate Governance

Organizational Structure and Controls

Strategic Leadership

Strategic Entrepreneurship

Filters

Exam 7: Acquisition and Restructuring Strategies

Cross-border acquisitions are typically made to

A major problem with buying other companies in order to gain access to their product lines is that the acquiring firm may lose its own ability to innovate.

Claude holds a large number of shares of Bayou Beauty, a regional brewing company that is considered a likely takeover target by a major international brewer. It would probably be in Claude's financial interest if Bayou Beauty's owners

Junk bonds are financial instruments commonly used to finance risky acquisitions that provide potential high returns for the bondholders.

The effect of leverage on an acquiring firm's financial returns is negative and thus should be avoided.

A manager in your company is proposing the acquisition of Taylor company, which has developed a new, innovative product. If you were to argue in favor of internal product development as opposed to acquisition, your argument could include all of the following EXCEPT

One problem with becoming too large is that large firms

Market power is derived primarily from the

A high level of debt can be a positive force because it allows firms to

When a firm acquires its supplier, it is engaging in a(an)

Due diligence is performed by investment banking firms because of laws protecting shareholders during acquisitions.

Which of the following is NOT a result of over-diversification?

Researchers have found that shareholders of acquired firms often

Currently, the rationale for making an acquisition includes each of the following EXCEPT

All of the following statements are correct EXCEPT

Evidence suggests that returns to shareholders of acquired firms are greater than those for acquiring firms.

Identify and explain the seven reasons firms engage in an acquisition strategy.

The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because

Moon-in-June, a designer and manufacturer of wedding dresses, has decided to purchase a retail chain specializing in bridal wear. This purchase will be useful in gaining more market power for Moon-in-June.

GE transformed its scope by acquiring several financial service firms.

Strategic Management and Strategic Competitiveness

The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis

The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

Business-Level Strategy

Competitive Rivalry and Competitive Dynamics

Corporate-Level Strategy

International Strategy

Cooperative Strategy

Corporate Governance

Organizational Structure and Controls

Strategic Leadership

Strategic Entrepreneurship

Filters