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 […]
A risk of the ________ financing strategy is unpredictable interest expense. A) aggressive B) conservative C) permanent D) seasonal ANSWER A
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 […]
In a __, both firms cease to exist, and a new corporation is established with a new name, a new board, and/or a new management team. a. merger b. acquisition c. consolidation d. buyout ANSWER C
The ________ financing strategy requires a firm to pay interest on excess funds borrowed but not needed throughout the entire year. A) aggressive B) conservative C) permanent D) seasonal ANSWER B
In a __ the bidder’s intention is to acquire the target and replace the target’s incumbent management, who vigorously resist the attempt. a. merger b. acquisition c. buyout d. hostile takeover ANSWER D
A __ occurs when a group of individuals uses cash to purchase the shares of a firm and takes ownership and control of the firm. a. buyout b. acquisition c. consolidation d. merger ANSWER A
The aggressive financing strategy is a ________ method while the conservative financing strategy is a ________ method. A) high-profit, high-risk; low-profit, low-risk B) high-profit, low-risk; low-profit, high-risk C) low-profit, high-risk; high-profit, low-risk D) low-profit, low-risk; high-profit, high-risk ANSWER A
In a _ merger, two firms that heretofore have been competitors in the same line of business combine. a. conglomerate b. vertical c. diagonal d. horizontal ANSWER D
A _ merger occurs between two firms that had been doing business in different stages of the production process in a given industry. a. conglomerate b. vertical c. diagonal d. horizontal ANSWER B
