Question 1

Merger occurs when two or more firms are combined to form a completely new corporation.

Accepted Answer

A) True 
 B)False

Question 2

The takeover target's management may not support a proposed takeover due to a very high tenderoffer.

Accepted Answer

A) True 
 B)False

Question 3

The main objective of a Plan of Arrangement is to wind-down the operations of a bankrupt firm.

Accepted Answer

A) True 
 B)False

Question 4

Greater control over the acquisition of new materials or the distribution of finished goods is aneconomic benefit of horizontal merger.

Accepted Answer

A) True 
 B)False

Question 5

Consolidation involves the combination of two or more firms, and the resulting firm maintains the identity of one of the firms.

Accepted Answer

A) True 
 B)False

Question 6

An attractive candidate for acquisition through leveraged buyout must have a good position in its industry with a solid profit history and reasonable expectation for growth.

Accepted Answer

A) True 
 B)False

Question 7

All of the following are advantages of holding companies EXCEPT

Accepted Answer

A)  reduced federal corporate taxes due to the holding company status. 
B)  possible provincial tax benefits realized by each subsidiary in its state of incorporation. 
C)  lawsuits or legal actions against a subsidiary will not threaten the remaining companies. 
D)  since each subsidiary is a separate corporation, the failure of one company should cost the holding company no more than its investment in that subsidiary. 
A)  reduced federal corporate taxes due to the holding company status. 
B)  possible provincial tax benefits realized by each subsidiary in its state of incorporation. 
C)  lawsuits or legal actions against a subsidiary will not threaten the remaining companies. 
D)  since each subsidiary is a separate corporation, the failure of one company should cost the holding company no more than its investment in that subsidiary.

Question 8

A holding company is a corporation that is controlled by one or more other corporations.

Accepted Answer

A) True 
 B)False

Question 9

A firm that wants to expand or extend its operations in existing or new product areas may avoid many of the risks associated with the design, manufacture, and sale of additional or new product and remove a potential competitor by acquiring a suitable going concern.

Accepted Answer

A) True 
 B)False

Question 10

Business failure may be caused by all of the following EXCEPT

Accepted Answer

A)  low or negative returns. 
B)  liabilities that exceed market value of assets. 
C)  technical insolvency. 
D)  book value of assets that exceed liabilities. 
A)  low or negative returns. 
B)  liabilities that exceed market value of assets. 
C)  technical insolvency. 
D)  book value of assets that exceed liabilities.

Question 11

The sale of a unit of a firm to existing management is often achieved through

Accepted Answer

A)  a leveraged buyout. 
B)  an employee stock option. 
C)  a cash exchange. 
D)  a limited partnership. 
A)  a leveraged buyout. 
B)  an employee stock option. 
C)  a cash exchange. 
D)  a limited partnership.

Question 12

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

Accepted Answer

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

Question 13

Normally, the acquiring firm pays a price that is a premium above the market price of the acquired firm. This means that the ratio of exchange in market price is

Accepted Answer

A)  always less than 1. 
B)  always greater than 1. 
C)  equal to 1. 
D)  usually negative. 
A)  always less than 1. 
B)  always greater than 1. 
C)  equal to 1. 
D)  usually negative.

Question 14

The "stakeholders" in targeted takeover companies include the

Accepted Answer

A)  employees. 
B)  customers. 
C)  creditors. 
D)  shareholders. 
E)  all of the above. 
A)  employees. 
B)  customers. 
C)  creditors. 
D)  shareholders. 
E)  all of the above.

Question 15

The combination of two or more companies to form a completely new corporation is a

Accepted Answer

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

Question 16

Most firms seeking merger partners will hire the services of

Accepted Answer

A)  an investment broker. 
B)  a commercial banker. 
C)  a private contractor. 
D)  an investment banker. 
A)  an investment broker. 
B)  a commercial banker. 
C)  a private contractor. 
D)  an investment banker.

Question 17

Strategic mergers seek to achieve various economies of scale by eliminating redundant functions, increasing market share, and improving raw material sourcing and finished product distribution.

Accepted Answer

A) True 
 B)False

Question 18

An attractive candidate for acquisition through a leveraged buyout should possess all of thefollowing characteristics EXCEPT

Accepted Answer

A)  a low level of debt. 
B)  a solid profit history and reasonable expectations for growth. 
C)  low fixed assets. 
D)  stable and predictable cash flows. 
A)  a low level of debt. 
B)  a solid profit history and reasonable expectations for growth. 
C)  low fixed assets. 
D)  stable and predictable cash flows.

Merger occurs when two or more firms are combined to form a completely new corporation.

The takeover target's management may not support a proposed takeover due to a very high tenderoffer.

The main objective of a Plan of Arrangement is to wind-down the operations of a bankrupt firm.

Greater control over the acquisition of new materials or the distribution of finished goods is aneconomic benefit of horizontal merger.

Consolidation involves the combination of two or more firms, and the resulting firm maintains the identity of one of the firms.

An attractive candidate for acquisition through leveraged buyout must have a good position in its industry with a solid profit history and reasonable expectation for growth.

All of the following are advantages of holding companies EXCEPT

A holding company is a corporation that is controlled by one or more other corporations.

A firm that wants to expand or extend its operations in existing or new product areas may avoid many of the risks associated with the design, manufacture, and sale of additional or new product and remove a potential competitor by acquiring a suitable going concern.

Business failure may be caused by all of the following EXCEPT

The sale of a unit of a firm to existing management is often achieved through

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

Normally, the acquiring firm pays a price that is a premium above the market price of the acquired firm. This means that the ratio of exchange in market price is

The "stakeholders" in targeted takeover companies include the

The combination of two or more companies to form a completely new corporation is a

Most firms seeking merger partners will hire the services of

Strategic mergers seek to achieve various economies of scale by eliminating redundant functions, increasing market share, and improving raw material sourcing and finished product distribution.

An attractive candidate for acquisition through a leveraged buyout should possess all of thefollowing characteristics EXCEPT

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

Exam 18: Mergers and Acquisitions, and Business Failure

Merger occurs when two or more firms are combined to form a completely new corporation.

The takeover target's management may not support a proposed takeover due to a very high tenderoffer.

The main objective of a Plan of Arrangement is to wind-down the operations of a bankrupt firm.

Greater control over the acquisition of new materials or the distribution of finished goods is aneconomic benefit of horizontal merger.

Consolidation involves the combination of two or more firms, and the resulting firm maintains the identity of one of the firms.

An attractive candidate for acquisition through leveraged buyout must have a good position in its industry with a solid profit history and reasonable expectation for growth.

All of the following are advantages of holding companies EXCEPT

A holding company is a corporation that is controlled by one or more other corporations.

A firm that wants to expand or extend its operations in existing or new product areas may avoid many of the risks associated with the design, manufacture, and sale of additional or new product and remove a potential competitor by acquiring a suitable going concern.

Business failure may be caused by all of the following EXCEPT

The sale of a unit of a firm to existing management is often achieved through

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

Normally, the acquiring firm pays a price that is a premium above the market price of the acquired firm. This means that the ratio of exchange in market price is

The "stakeholders" in targeted takeover companies include the

The combination of two or more companies to form a completely new corporation is a

Most firms seeking merger partners will hire the services of

Strategic mergers seek to achieve various economies of scale by eliminating redundant functions, increasing market share, and improving raw material sourcing and finished product distribution.

An attractive candidate for acquisition through a leveraged buyout should possess all of thefollowing characteristics EXCEPT

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