Question 1

Congeneric merger is a merger in which a firm acquires a supplier or a customer.

Accepted Answer

A) True 
 B)False

Question 2

Strategic merger is a merger transaction undertaken with the goal of restructuring the acquiredcompany in order to improve its cash flow and unlock its hidden value.

Accepted Answer

A) True 
 B)False

Question 3

The earnings per share of the merged firm are generally above the premerger earnings per share of one firm and below the premerger earnings per share of the other, after making the necessary adjustment for the ratio of exchange.

Accepted Answer

A) True 
 B)False

Question 4

The primary advantage of a holding company, that permit(s) the firm to control a large amount ofassets with a relatively small dollar investment is known as

Accepted Answer

A)  tax effects. 
B)  risk protection. 
C)  the leverage effect. 
D)  administrative costs. 
A)  tax effects. 
B)  risk protection. 
C)  the leverage effect. 
D)  administrative costs.

Question 5

Tender offer is a formal offer to purchase a given number of shares of a firm's stock at a specified price.

Accepted Answer

A) True 
 B)False

Question 6

Business combinations are used by firms to externally expand in order to achieve all of the following objectives EXCEPT

Accepted Answer

A)  to acquire needed assets. 
B)  to increase common stock outstanding. 
C)  to increase liquidity. 
D)  to increase productive capacity. 
A)  to acquire needed assets. 
B)  to increase common stock outstanding. 
C)  to increase liquidity. 
D)  to increase productive capacity.

Question 7

Synergy is the extra value created by merging two firms.

Accepted Answer

A) True 
 B)False

Question 8

Consolidation is a corporation that has voting control of one or more other corporations.

Accepted Answer

A) True 
 B)False

Question 9

An application under the Companies' Creditors Arrangement Act can only be made by insolvent companies.

Accepted Answer

A) True 
 B)False

Question 10

Greater control over the acquisition of raw materials or the distribution of finished goods is an economic benefit 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

Question 11

In a voluntary settlement, the debtor firm bypasses many of the costs involved in legal bankruptcy proceedings.

Accepted Answer

A) True 
 B)False

Question 12

A formal proposal to purchase a given number of shares of a firm's stock at a specified price is a

Accepted Answer

A)  warrant. 
B)  tender offer. 
C)  stock purchase option. 
D)  right. 
A)  warrant. 
B)  tender offer. 
C)  stock purchase option. 
D)  right.

Question 13

Typically in a leveraged buyout approximately___________percent (if not more) of the purchase price is financed with debt.

Accepted Answer

A)  70 
B)  30 
C)  50 
D)  90 
A)  70 
B)  30 
C)  50 
D)  90

Question 14

If the P/E paid is equal to the P/E of the acquiring company, the effect on the earnings per share of the acquired company will be

Accepted Answer

A)  negative. 
B)  positive. 
C)  neutral. 
D)  uncorrelated. 
A)  negative. 
B)  positive. 
C)  neutral. 
D)  uncorrelated.

Question 15

All of the following are disadvantages of holding companies EXCEPT

Accepted Answer

A)  high cost of administration. 
B)  increased risk. 
C)  legal responsibility for subsidiaries. 
D)  double taxation. 
A)  high cost of administration. 
B)  increased risk. 
C)  legal responsibility for subsidiaries. 
D)  double taxation.

Question 16

A financial merger is a merger transaction undertaken to achieve economies of scale.

Accepted Answer

A) True 
 B)False

Question 17

The companies controlled by a holding company are normally referred to as its subsidiaries.

Accepted Answer

A) True 
 B)False

Question 18

If the P/E paid is less than the P/E of the acquiring company, the effect on the earnings per share of the acquired company will be

Accepted Answer

A)  uncorrelated. 
B)  neutral. 
C)  positive. 
D)  negative. 
A)  uncorrelated. 
B)  neutral. 
C)  positive. 
D)  negative.

Question 19

Stock swap transaction is an acquisition method in which the acquiring firm exchanges its shares for shares of the target company according to a predetermined ratio.

Accepted Answer

A) True 
 B)False

Question 20

The acquisition of a "cash?rich" company allows the acquiring company

Accepted Answer

A)  to reduce leverage and to increase borrowing power. 
B)  to reap greater tax benefits. 
C)  to develop better managers. 
D)  to achieve economies of scale in some phase of the business. 
A)  to reduce leverage and to increase borrowing power. 
B)  to reap greater tax benefits. 
C)  to develop better managers. 
D)  to achieve economies of scale in some phase of the business.

Congeneric merger is a merger in which a firm acquires a supplier or a customer.

Strategic merger is a merger transaction undertaken with the goal of restructuring the acquiredcompany in order to improve its cash flow and unlock its hidden value.

The earnings per share of the merged firm are generally above the premerger earnings per share of one firm and below the premerger earnings per share of the other, after making the necessary adjustment for the ratio of exchange.

The primary advantage of a holding company, that permit(s) the firm to control a large amount ofassets with a relatively small dollar investment is known as

Tender offer is a formal offer to purchase a given number of shares of a firm's stock at a specified price.

Business combinations are used by firms to externally expand in order to achieve all of the following objectives EXCEPT

Synergy is the extra value created by merging two firms.

Consolidation is a corporation that has voting control of one or more other corporations.

An application under the Companies' Creditors Arrangement Act can only be made by insolvent companies.

Greater control over the acquisition of raw materials or the distribution of finished goods is an economic benefit of

In a voluntary settlement, the debtor firm bypasses many of the costs involved in legal bankruptcy proceedings.

A formal proposal to purchase a given number of shares of a firm's stock at a specified price is a

Typically in a leveraged buyout approximately___________percent (if not more) of the purchase price is financed with debt.

If the P/E paid is equal to the P/E of the acquiring company, the effect on the earnings per share of the acquired company will be

All of the following are disadvantages of holding companies EXCEPT

A financial merger is a merger transaction undertaken to achieve economies of scale.

The companies controlled by a holding company are normally referred to as its subsidiaries.

If the P/E paid is less than the P/E of the acquiring company, the effect on the earnings per share of the acquired company will be

Stock swap transaction is an acquisition method in which the acquiring firm exchanges its shares for shares of the target company according to a predetermined ratio.

The acquisition of a "cash?rich" company allows the acquiring company

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

Congeneric merger is a merger in which a firm acquires a supplier or a customer.

Strategic merger is a merger transaction undertaken with the goal of restructuring the acquiredcompany in order to improve its cash flow and unlock its hidden value.

The earnings per share of the merged firm are generally above the premerger earnings per share of one firm and below the premerger earnings per share of the other, after making the necessary adjustment for the ratio of exchange.

The primary advantage of a holding company, that permit(s) the firm to control a large amount ofassets with a relatively small dollar investment is known as

Tender offer is a formal offer to purchase a given number of shares of a firm's stock at a specified price.

Business combinations are used by firms to externally expand in order to achieve all of the following objectives EXCEPT

Synergy is the extra value created by merging two firms.

Consolidation is a corporation that has voting control of one or more other corporations.

An application under the Companies' Creditors Arrangement Act can only be made by insolvent companies.

Greater control over the acquisition of raw materials or the distribution of finished goods is an economic benefit of

In a voluntary settlement, the debtor firm bypasses many of the costs involved in legal bankruptcy proceedings.

A formal proposal to purchase a given number of shares of a firm's stock at a specified price is a

Typically in a leveraged buyout approximately___________percent (if not more) of the purchase price is financed with debt.

If the P/E paid is equal to the P/E of the acquiring company, the effect on the earnings per share of the acquired company will be

All of the following are disadvantages of holding companies EXCEPT

A financial merger is a merger transaction undertaken to achieve economies of scale.

The companies controlled by a holding company are normally referred to as its subsidiaries.

If the P/E paid is less than the P/E of the acquiring company, the effect on the earnings per share of the acquired company will be

Stock swap transaction is an acquisition method in which the acquiring firm exchanges its shares for shares of the target company according to a predetermined ratio.

The acquisition of a "cash?rich" company allows the acquiring company

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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