A firm which uses the aggressive financing strategy plans to purchase a major fixed asset financed with a loan. The most likely consequence of this action is ________. A) a decrease in the current ratio B) an increase in net working capital C) a decrease in the risk of insolvency D) an increase in long-term […]
Date: September 19th, 2020
A _ merger involves the combination of two firms in unrelated industries. a. conglomerate b. vertical c. diagonal d. horizontal ANSWER A
Date: September 19th, 2020
obtains if a merger results in improvements in any business function, including: (i) management; (vii) labor costs; (ii) production or distribution; etc. a. Operating synergy b. Financial synergy c. Business synchronization d. Economies of scope ANSWER A
Date: September 19th, 2020
obtains in a merger if some aspect of the financial configuration of the merged firm causes its market value to be greater than the sum of the market values of the separate firms. a. Operating synergy b. Financial synergy c. Business synchronization d. Economies of scope ANSWER B
Date: September 19th, 2020
In theory, the conservative financing strategy ignores ________. A) all current liabilities B) the spontaneous forms of short-term financing C) all current assets D) the high risk associated with external financing ANSWER B
Date: September 19th, 2020
Only a firm’s permanent financing requirement (and not the seasonal requirement) is financed with ________ in the aggressive funding strategy. A) long-term debt B) T-bills C) retained earnings D) accounts payable ANSWER A
Date: September 19th, 2020
In economic conditions characterized by a scarcity of short-term funds, a firm would best choose the ________ financing strategy. A) aggressive B) conservative C) permanent D) seasonal ANSWER B
Date: September 19th, 2020
The original creditors of both firms in a merger would benefit from the overall decrease in the probability of bankruptcy that attends the merger, which in turn results from the associated with creditors now having a claim against a larger combined firm. a. tax reduction b. increased interest payments c. decreased principle d. co-insurance […]
Date: September 19th, 2020
A risk of the ________ financing strategy is unpredictable interest expense. A) aggressive B) conservative C) permanent D) seasonal ANSWER A
Date: September 19th, 2020
A legitimate means of averting an unintended transfer of wealth to creditors in a merger is to: a. decrease leverage. b. reduce the volatility of operating profits. c. offer a guarantee to the separate firms’ creditors. d. increase leverage. 11.According to the hypothesis, in an acquisition or a takeover the bidder’s management overvalues the target […]
Date: September 19th, 2020
