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MCQ

1. The document discusses various types of mergers and acquisitions, corporate finance strategies, and concepts from organizational behavior. It provides multiple choice questions to test understanding of terms like strategic acquisitions, tender offers, divestitures, joint ventures, and antitrust law. 2. Key strategies and concepts covered include pursuing acquisitions to sell off assets and cut costs more efficiently, tender offers made directly to shareholders, restructuring firms to create shareholder value, and reasons for mergers and divestitures like economies of scale or reducing synergies. 3. Motivations for acquisitions are explored, like acquiring firms with tax losses or addressing hubris. Landmark legislation around antitrust and

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Razin Gajiwala
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4K views5 pages

MCQ

1. The document discusses various types of mergers and acquisitions, corporate finance strategies, and concepts from organizational behavior. It provides multiple choice questions to test understanding of terms like strategic acquisitions, tender offers, divestitures, joint ventures, and antitrust law. 2. Key strategies and concepts covered include pursuing acquisitions to sell off assets and cut costs more efficiently, tender offers made directly to shareholders, restructuring firms to create shareholder value, and reasons for mergers and divestitures like economies of scale or reducing synergies. 3. Motivations for acquisitions are explored, like acquiring firms with tax losses or addressing hubris. Landmark legislation around antitrust and

Uploaded by

Razin Gajiwala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

A firm that acquires another firm as part of its


strategy to sell off assets, cut costs, and operate the
remaining assets more efficiently is engaging in
__________.
A. a strategic acquisition
B. a financial acquisition
C. two-tier tender offer
D. shark repellent
2. A would-be acquirer's offer to buy stock directly from
shareholders is referred to as __________.
A. a white knight
B. a joint venture
C. a tender offer
D. a takeover
3. The restructuring of a firm should be undertaken if
__________.
A. The restructuring is expected to create value for
shareholders
B. The restructuring is expected to increase earnings per share
(EPS) next year
C. The restructuring is expected to increase the firms market share
power within the industry
D. The current employees will receive additional stock option to
align employee interest

4. Economies of scale, market share dominance, and
technological advances are reasons most likely to be
offered to justify a __________.

A. financial acquisition
B. strategic acquisition
C. divestiture
D. supermajority merger approval provision

5 A reason suggested by the authors for a divestiture,
such as a sell-off or spin-off, is __________.

A. economies of scale
B. hubris
C. synergy
D. reverse synergy

6 What is the most likely reason that a firm (who is
highly profitable) might consider acquiring a firm that
has had large recent losses and will continue to have
losses into the near future?

A. Hubris
B. White knight.
C. Tax-loss usage
D. Increase assets.

7 Richard Roll makes a case with the __________
hypothesis that takeovers are motivated by bidder
pride and confidence in their abilities relative to
others.

A. hubris
B. efficient markets
C. management success
D. synergy

8 A merger that signals to the investors in the market
place a change in strategy or operating efficiency that
can not be conveyed in another manner is referred to
as __________.

A. the information effect
B. the wealth effect
C. strategic effect
D. bootstrapping effect

9 A firm that acquires another firm as part of its overall
business strategy is engaging in __________.

A. a strategic acquisition
B. a financial acquisition
C. a two-tier tender offer
D. a shark repellent




10 The average takeover premium a target firm has
historically received is closest to which of the
following percentages?

A. 5%
B. 12%
C. 30%
D. 80%


11 What remains after we subtract operating costs and
capital expenditures necessary to at least sustain
cash flows from total firm revenues?

A. Free cash flows.
B. Strategic cash flows.
C. Net income.
D. Earnings before interest and taxes (EBIT).


12 How should a successful acquisition be evaluated in
the long-run?

A. The acquisition is successful if the acquirer is able to increase its
earnings per share (EPS), relative to what it would have been
without the acquisition.
B. The acquisition is successful if the acquirer is able to reduce its
debt-to-total asset ratio, and hence risk, relative to what it
would have been without the acquisition.
C. The acquisition is successful if the acquirer is able to diversify its
asset base and reduce its overall risk.
D. The acquisition is successful if the market price of the
acquirer's stock increases over what it would have been
without the acquisition.

13 What is the landmark piece of legislation designed to
promote competition by combating monopolistic
behaviors through antitrust law?

A. The Securities Act of 1933.
B. The Securities Act of 1934.
C. The Antitrust Act of 1915.
D. The Clayton Act.

14 A firm can acquire another firm __________.

A. only by purchasing the assets of the target firm
B. only by purchasing the common stock of the target firm
C. by either purchasing the assets or the common equity of
the target firm.
D. None of the above are methods of acquiring the target firm

15 Which of the following hypotheses attempt to
explain the motivation behind creating barriers to
receiving unsolicited takeover offers?

A. Only the managerial entrenchment hypothesis.
B. Only the shareholders' interest hypothesis.
C. Only the takeover barrier hypothesis.
D. Both the first and second answers are hypotheses that
attempt to explain this motivation.

16 What is a business organizational model that
involves the large-scale outsourcing of business
functions?

A. Virtual corporation.
B. Joint venture.
C. Corporate liquidation.
D. Equity carve-out.

17 A bidder that offers a higher price to the first fixed
quantity of shares tendered and a lower second price
for all remaining shares is engaging in __________.

A. a strategic acquisition
B. a financial acquisition
C. a two-tier tender offer
D. shark repellent


18 How do you refer to the public sale of stock in a
subsidiary in which the parent usually retains
majority control?

A. Virtual corporation.
B. Joint venture.
C. Corporate liquidation.
D. Equity carve-out.


19 By using a __________, the firm can independently
control considerable assets with a very limited
amount of equity.

A. joint venture
B. leveraged buyout (LBO)
C. spin-off
D. Consolidation

20 As discussed in the text, the creation of a global
24-hour news and information cable network called
MSNBC is an example of a __________.

A. strategic acquisition
B. financial acquisition
C. joint venture
D. virtual corporation

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