Question 1

___________may result in expansion of operations in an existing product line and elimination of a competitor.

Accepted Answer

A)  Conglomerate merger 
B)  Horizontal merger 
C)  Congeneric merger 
D)  Vertical merger 
A)  Conglomerate merger 
B)  Horizontal merger 
C)  Congeneric merger 
D)  Vertical merger B

Question 2

A leveraged buyout needs to be carried out through

Accepted Answer

A)  a vertical merger. 
B)  a hostile takeover. 
C)  a friendly merger. 
D)  a conglomerate merger. 
A)  a vertical merger. 
B)  a hostile takeover. 
C)  a friendly merger. 
D)  a conglomerate merger. C

Question 3

An attractive candidate for acquisition through leveraged buyout should possess which of the following characteristics:

Accepted Answer

A)  a relatively low level of debt. 
B)  stable and predictable cash flows that are adequate to meet interest and principal payments on the debt and provide adequate working capital. 
C)  a good position in its industry with a solid profit history and reasonable expectations of growth. 
D)  a relatively high level of "bankable" assets that can be used as loan collateral. 
E)  all of the above. 
A)  a relatively low level of debt. 
B)  stable and predictable cash flows that are adequate to meet interest and principal payments on the debt and provide adequate working capital. 
C)  a good position in its industry with a solid profit history and reasonable expectations of growth. 
D)  a relatively high level of "bankable" assets that can be used as loan collateral. 
E)  all of the above. E

Question 4

Financial mergers involve merging firms in order to achieve various economies of scale byeliminating redundant functions, increasing market share, and improving raw material sourcingand finished product distribution.

Accepted Answer

A) True 
 B)False

Question 5

Technical insolvency occurs when a firm's liabilities exceed the fair market value of its assets.

Accepted Answer

A) True 
 B)False

Question 6

A key consideration in the holding company decision is

Accepted Answer

A)  the risk from the separate "companies" in the holding company being classed as one company. 
B)  the risk-return tradeoff due to the leverage effect. 
C)  the greater "distance" between top level and operating management. 
D)  the risk of the domino effect if one company in the holding company fails. 
A)  the risk from the separate "companies" in the holding company being classed as one company. 
B)  the risk-return tradeoff due to the leverage effect. 
C)  the greater "distance" between top level and operating management. 
D)  the risk of the domino effect if one company in the holding company fails.

Question 7

A corporate takeover is valued as a capital budgeting exercise.

Accepted Answer

A) True 
 B)False

Question 8

One of the key motives for combinations is the tax benefit of

Accepted Answer

A)  increasing additional recaptured depreciation. 
B)  using capital gains. 
C)  taking advantage of the other firm's tax loss carryforward. 
D)  reducing the marginal tax rate. 
A)  increasing additional recaptured depreciation. 
B)  using capital gains. 
C)  taking advantage of the other firm's tax loss carryforward. 
D)  reducing the marginal tax rate.

Question 9

The owners of a holding company can control significantly larger amounts of assets than theycould acquire through mergers.

Accepted Answer

A) True 
 B)False

Question 10

Horizontal merger is a merger in which one firm acquires another firm in the same generalindustry but neither in the same line of business nor a supplier or customer.

Accepted Answer

A) True 
 B)False

Question 11

Leveraged buyouts are clear examples of

Accepted Answer

A)  strategic mergers. 
B)  financial mergers. 
C)  vertical mergers. 
D)  congeneric mergers. 
A)  strategic mergers. 
B)  financial mergers. 
C)  vertical mergers. 
D)  congeneric mergers.

Question 12

When a firm undertakes a merger to improve its sources and supply of raw materials, this is an example of a

Accepted Answer

A)  hostile takeover. 
B)  friendly merger. 
C)  financial merger. 
D)  strategic merger. 
A)  hostile takeover. 
B)  friendly merger. 
C)  financial merger. 
D)  strategic merger.

Question 13

Which of the following describes a merger in which one firm acquires a supplier or a customer?

Accepted Answer

A)  horizontal merger. 
B)  conglomerate. 
C)  vertical. 
D)  congeneric. 
A)  horizontal merger. 
B)  conglomerate. 
C)  vertical. 
D)  congeneric.

Question 14

An attractive candidate for acquisition through leveraged buyout usually has a relatively high level of debt and low level of "bankable" assets.

Accepted Answer

A) True 
 B)False

Question 15

Two-tier offer is a tender offer in which the terms offered are more attractive to those who tendershares early.

Accepted Answer

A) True 
 B)False

Question 16

A merger of a paper manufacturer and a logging company is an example of

Accepted Answer

A)  horizontal merger. 
B)  conglomerate merger. 
C)  vertical merger. 
D)  congeneric merger. 
A)  horizontal merger. 
B)  conglomerate merger. 
C)  vertical merger. 
D)  congeneric merger.

Question 17

A major disadvantage of holding companies is the increased risk resulting from the leverage effect.

Accepted Answer

A) True 
 B)False

Question 18

The creation of a high?debt, private corporation with improved cash flow and value is the goal in

Accepted Answer

A)  leveraged buyout. 
B)  issuing junk bonds. 
C)  a financial merger. 
D)  conglomerate merger. 
A)  leveraged buyout. 
B)  issuing junk bonds. 
C)  a financial merger. 
D)  conglomerate merger.

Question 19

The synergy of mergers is the economies of scale resulting from merged firms' lower overhead.

Accepted Answer

A) True 
 B)False

Question 20

The combination of a dress manufacturer and a credit bureau is an example of

Accepted Answer

A)  vertical merger. 
B)  conglomerate merger. 
C)  congeneric merger. 
D)  horizontal merger. 
A)  vertical merger. 
B)  conglomerate merger. 
C)  congeneric merger. 
D)  horizontal merger.

___________may result in expansion of operations in an existing product line and elimination of a competitor.

A leveraged buyout needs to be carried out through

An attractive candidate for acquisition through leveraged buyout should possess which of the following characteristics:

Financial mergers involve merging firms in order to achieve various economies of scale byeliminating redundant functions, increasing market share, and improving raw material sourcingand finished product distribution.

Technical insolvency occurs when a firm's liabilities exceed the fair market value of its assets.

A key consideration in the holding company decision is

A corporate takeover is valued as a capital budgeting exercise.

One of the key motives for combinations is the tax benefit of

The owners of a holding company can control significantly larger amounts of assets than theycould acquire through mergers.

Horizontal merger is a merger in which one firm acquires another firm in the same generalindustry but neither in the same line of business nor a supplier or customer.

Leveraged buyouts are clear examples of

When a firm undertakes a merger to improve its sources and supply of raw materials, this is an example of a

Which of the following describes a merger in which one firm acquires a supplier or a customer?

An attractive candidate for acquisition through leveraged buyout usually has a relatively high level of debt and low level of "bankable" assets.

Two-tier offer is a tender offer in which the terms offered are more attractive to those who tendershares early.

A merger of a paper manufacturer and a logging company is an example of

A major disadvantage of holding companies is the increased risk resulting from the leverage effect.

The creation of a high?debt, private corporation with improved cash flow and value is the goal in

The synergy of mergers is the economies of scale resulting from merged firms' lower overhead.

The combination of a dress manufacturer and a credit bureau is an example of

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Dividend Policy

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

International Corporate Finance

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Exam 18: Mergers and Acquisitions, and Business Failure

___________may result in expansion of operations in an existing product line and elimination of a competitor.

A leveraged buyout needs to be carried out through

An attractive candidate for acquisition through leveraged buyout should possess which of the following characteristics:

Financial mergers involve merging firms in order to achieve various economies of scale byeliminating redundant functions, increasing market share, and improving raw material sourcingand finished product distribution.

Technical insolvency occurs when a firm's liabilities exceed the fair market value of its assets.

A key consideration in the holding company decision is

A corporate takeover is valued as a capital budgeting exercise.

One of the key motives for combinations is the tax benefit of

The owners of a holding company can control significantly larger amounts of assets than theycould acquire through mergers.

Horizontal merger is a merger in which one firm acquires another firm in the same generalindustry but neither in the same line of business nor a supplier or customer.

Leveraged buyouts are clear examples of

When a firm undertakes a merger to improve its sources and supply of raw materials, this is an example of a

Which of the following describes a merger in which one firm acquires a supplier or a customer?

An attractive candidate for acquisition through leveraged buyout usually has a relatively high level of debt and low level of "bankable" assets.

Two-tier offer is a tender offer in which the terms offered are more attractive to those who tendershares early.

A merger of a paper manufacturer and a logging company is an example of

A major disadvantage of holding companies is the increased risk resulting from the leverage effect.

The creation of a high?debt, private corporation with improved cash flow and value is the goal in

The synergy of mergers is the economies of scale resulting from merged firms' lower overhead.

The combination of a dress manufacturer and a credit bureau is an example of

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Dividend Policy

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

International Corporate Finance

Filters