Sample Questions
 

 

1. The restructuring of a corporation should be undertaken if ______________.

A. the restructuring can prevent an unwanted takeover

B. the restructuring is expected to create value for shareholders

C. the restructuring is expected to increase the firm's revenue

D. the interests of bondholders are not negatively affected

2. 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

3. 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

4. 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

5. 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

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

Answers: 1 (B), 2 (B), 3 (C), 4 (C), 5 (A)

 

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