Question 1

Conglomerate merger is a merger combining firms in unrelated businesses.

Accepted Answer

A) True 
 B)False

Question 2

When making a cash acquisition of a going concern, the acquiring corporation must be certain

Accepted Answer

A)  to recognize different accounting techniques. 
B)  to consider the problems of assimilating the acquired management. 
C)  to adjust after?tax cash flows. 
D)  to adjust the discount rate for risk differences. 
A)  to recognize different accounting techniques. 
B)  to consider the problems of assimilating the acquired management. 
C)  to adjust after?tax cash flows. 
D)  to adjust the discount rate for risk differences.

Question 3

The overriding goal for merging is the maximization of the owners' wealth as reflected in theacquirer's share price.

Accepted Answer

A) True 
 B)False

Question 4

Under voluntary liquidation, common shareholders rank behind secured creditors but ahead of unsecured creditors in receiving compensation.

Accepted Answer

A) True 
 B)False

Question 5

Vertical merger is a merger of two firms in the same line of business.

Accepted Answer

A) True 
 B)False

Question 6

All of the following may be true about tender offers EXCEPT

Accepted Answer

A)  management has the exclusive right to accept the offer. 
B)  defensive tactics may be taken to ward off the offer. 
C)  they may be made without warning as an abrupt attempt at a corporate takeover. 
D)  they may add pressure to existing merger negotiations. 
A)  management has the exclusive right to accept the offer. 
B)  defensive tactics may be taken to ward off the offer. 
C)  they may be made without warning as an abrupt attempt at a corporate takeover. 
D)  they may add pressure to existing merger negotiations.

Question 7

In defending against hostile takeover attempts, a company will approve anti?takeover amendmentsto the corporate charter that constrain the firm's ability to transfer managerial control of the firm asa result of a merger. This is called the __________ strategy.

Accepted Answer

A)  poison pill 
B)  greenmail 
C)  shark repellent 
D)  golden parachute 
A)  poison pill 
B)  greenmail 
C)  shark repellent 
D)  golden parachute

Question 8

The reduction of risk resulting from combining firms with differing seasonal or cyclical patterns ofsales or earnings is a key benefit of

Accepted Answer

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

Question 9

The actual ratio of exchange in a share-exchange acquisition is the ratio of the amount paid per share of the target company to the per-share market price of the acquiring firm.

Accepted Answer

A) True 
 B)False

Question 10

The basic difficulty in applying the capital budgeting approach to the acquisition of a going concern is the estimation of initial cash flows and certain risk consideration.

Accepted Answer

A) True 
 B)False

Question 11

The use of a large amount of debt to finance the acquisition of other firms is a

Accepted Answer

A)  congeneric buyout. 
B)  leveraged buyout. 
C)  hostile merger. 
D)  conglomerate merger. 
A)  congeneric buyout. 
B)  leveraged buyout. 
C)  hostile merger. 
D)  conglomerate merger.

Question 12

Leveraged buy-outs (LBOs) are an example of a financial merger undertaken to create a high-debt private corporation with improved cash flow and value.

Accepted Answer

A) True 
 B)False

Question 13

The long?run effect on the earnings per share of the merged firm depends largely on

Accepted Answer

A)  the ratio of exchange. 
B)  the synergy of the merged firm. 
C)  the pre-merger P/E ratio. 
D)  the tax considerations. 
A)  the ratio of exchange. 
B)  the synergy of the merged firm. 
C)  the pre-merger P/E ratio. 
D)  the tax considerations.

Question 14

The ability to use the same sales and distribution channels to reach customers of both businesses isa benefit of

Accepted Answer

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

Question 15

The firm in a merger transaction that attempts to merge or takeover another company is called the

Accepted Answer

A)  conglomerate. 
B)  target company. 
C)  holding company. 
D)  acquiring company. 
A)  conglomerate. 
B)  target company. 
C)  holding company. 
D)  acquiring company.

Question 16

A hostile merger is typically accomplished through

Accepted Answer

A)  a tender offer. 
B)  an exchange of the acquirer's stocks and bonds. 
C)  a cash purchase. 
D)  an exchange of the acquirer's stock. 
A)  a tender offer. 
B)  an exchange of the acquirer's stocks and bonds. 
C)  a cash purchase. 
D)  an exchange of the acquirer's stock.

Question 17

A combination of companies where the former corporations cease to exist is

Accepted Answer

A)  a consolidation. 
B)  a congeneric formation. 
C)  a holding company. 
D)  a merger. 
A)  a consolidation. 
B)  a congeneric formation. 
C)  a holding company. 
D)  a merger.

Question 18

__________is achieved by acquiring a company in the same general industry, but neither in the same line of business nor a supplier or a customer.

Accepted Answer

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

Question 19

The combination of two or more companies which results in the firm maintaining the identity of one of the firms is

Accepted Answer

A)  consolidation. 
B)  merger. 
C)  holding company. 
D)  congeneric formation. 
A)  consolidation. 
B)  merger. 
C)  holding company. 
D)  congeneric formation.

Question 20

The actual ratio of exchange in a stock?exchange acquisition is the ratio of the

Accepted Answer

A)  market value per share of the target company to the per share market price of the acquiring firm. 
B)  amount paid per share of the target company to the per share market price of the acquiring firm. 
C)  book value per share of the target company to the per share market price of the acquiring firm. 
D)  amount paid per share of the target company to the per share book value of the acquiring firm. 
A)  market value per share of the target company to the per share market price of the acquiring firm. 
B)  amount paid per share of the target company to the per share market price of the acquiring firm. 
C)  book value per share of the target company to the per share market price of the acquiring firm. 
D)  amount paid per share of the target company to the per share book value of the acquiring firm.

Conglomerate merger is a merger combining firms in unrelated businesses.

When making a cash acquisition of a going concern, the acquiring corporation must be certain

The overriding goal for merging is the maximization of the owners' wealth as reflected in theacquirer's share price.

Under voluntary liquidation, common shareholders rank behind secured creditors but ahead of unsecured creditors in receiving compensation.

Vertical merger is a merger of two firms in the same line of business.

All of the following may be true about tender offers EXCEPT

In defending against hostile takeover attempts, a company will approve anti?takeover amendmentsto the corporate charter that constrain the firm's ability to transfer managerial control of the firm asa result of a merger. This is called the __________ strategy.

The reduction of risk resulting from combining firms with differing seasonal or cyclical patterns ofsales or earnings is a key benefit of

The actual ratio of exchange in a share-exchange acquisition is the ratio of the amount paid per share of the target company to the per-share market price of the acquiring firm.

The basic difficulty in applying the capital budgeting approach to the acquisition of a going concern is the estimation of initial cash flows and certain risk consideration.

The use of a large amount of debt to finance the acquisition of other firms is a

Leveraged buy-outs (LBOs) are an example of a financial merger undertaken to create a high-debt private corporation with improved cash flow and value.

The long?run effect on the earnings per share of the merged firm depends largely on

The ability to use the same sales and distribution channels to reach customers of both businesses isa benefit of

The firm in a merger transaction that attempts to merge or takeover another company is called the

A hostile merger is typically accomplished through

A combination of companies where the former corporations cease to exist is

__________is achieved by acquiring a company in the same general industry, but neither in the same line of business nor a supplier or a customer.

The combination of two or more companies which results in the firm maintaining the identity of one of the firms is

The actual ratio of exchange in a stock?exchange acquisition is the ratio of the

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

Conglomerate merger is a merger combining firms in unrelated businesses.

When making a cash acquisition of a going concern, the acquiring corporation must be certain

The overriding goal for merging is the maximization of the owners' wealth as reflected in theacquirer's share price.

Under voluntary liquidation, common shareholders rank behind secured creditors but ahead of unsecured creditors in receiving compensation.

Vertical merger is a merger of two firms in the same line of business.

All of the following may be true about tender offers EXCEPT

In defending against hostile takeover attempts, a company will approve anti?takeover amendmentsto the corporate charter that constrain the firm's ability to transfer managerial control of the firm asa result of a merger. This is called the __________ strategy.

The reduction of risk resulting from combining firms with differing seasonal or cyclical patterns ofsales or earnings is a key benefit of

The actual ratio of exchange in a share-exchange acquisition is the ratio of the amount paid per share of the target company to the per-share market price of the acquiring firm.

The basic difficulty in applying the capital budgeting approach to the acquisition of a going concern is the estimation of initial cash flows and certain risk consideration.

The use of a large amount of debt to finance the acquisition of other firms is a

Leveraged buy-outs (LBOs) are an example of a financial merger undertaken to create a high-debt private corporation with improved cash flow and value.

The long?run effect on the earnings per share of the merged firm depends largely on

The ability to use the same sales and distribution channels to reach customers of both businesses isa benefit of

The firm in a merger transaction that attempts to merge or takeover another company is called the

A hostile merger is typically accomplished through

A combination of companies where the former corporations cease to exist is

__________is achieved by acquiring a company in the same general industry, but neither in the same line of business nor a supplier or a customer.

The combination of two or more companies which results in the firm maintaining the identity of one of the firms is

The actual ratio of exchange in a stock?exchange acquisition is the ratio of the

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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