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An acquisition plan is developed if management determines that an acquisition or
merger is required to implement the firm's business strategy. True or False
Answer:
Asset based lending does not require the borrower to pledge assets as collateral
underlying the loans. True or False
Answer:
Analysts have increasingly used the relationship between enterprise value to earnings
before interest and taxes, depreciation, and amortization to value firms. True or False
Answer:
A merger agreement should specify how the seller should be reimbursed for products
shipped or services provided by the seller before closing but not paid for by the
customer until after closing. True or False
Answer:
A corporate mission statement seeks to describe the corporation's purpose for being and
where the corporation hopes to go. True or False
Answer:
A no-shop agreement prohibits the takeover target from seeking other bids. True or
False
Answer:
When investment bankers are paid by a firm's board to evaluate a proposed takeover
bid, their opinions are given in a so-called "fairness letter." True or False
Answer:
Firms investing in industries or countries whose economic cycles are highly correlated
may lower the overall volatility in their consolidated earnings and cash flows. True or
false
Answer:
A proxy contest is one in which a group of dissident shareholders attempts to obtain
representation on a firm's board by soliciting other shareholders for the right to vote
their shares. True or False
Answer:
Tax benefits, such as tax credits and net operating loss carry-forwards of the target firm,
are often considered the primary reason for the acquisition of that firm. True or False
Answer:
Companies may not seek the protection of bankruptcy court to avoid liquidation. True
of False
Answer:
To qualify for a Type A reorganization, the transaction must be either a merger or a
consolidation. True or False
Answer:
Leveraged buyout firms use the unencumbered assets and operating cash flow of the
target firm to finance the transaction. True or False
Answer:
Holding companies and their shareholders may be subject to triple taxation. True or
False
Answer:
Book values are maligned as measures of value, because they represent historical rather
than current market values. True or False
Answer:
Who receives rights to distribute, manufacture, acquire or license technology, or
purchase future products or technology is an issue usually resolved in defining the
scope of the alliance.
True or False
Answer:
The market targeted by the firm should reflect the fit between the corporation's primary
strengths and competencies and its ability to satisfy customer needs better than the
competition. True or False
Answer:
With tax avoidance and fraud common in many countries, the buyer may find that some
assets will transfer encumbered by tax liens. True or False
Answer:
The purpose of adjusting the target's income statement is to provide an accurate
estimate of the current year's reported operating income or operating cash flow. True or
False
Answer:
Complex models because of their greater sophistication are necessarily more accurate
than simple models. True or False
Answer:
There is some evidence that the Sarbanes-Oxley Act of 2002 has also been a factor in
some firms going private as a result of the onerous reporting requirements of the bill.
True or False
Answer:
The American Depository Receipt (ADR) market evolved as a means of enabling
foreign firms to raise funds in the U.S. equity markets. True or False
Answer:
Tax-free reorganizations require that substantially all of the consideration received by
the target's shareholders be paid in common or preferred stock. True or False
Answer:
The assumption of seller liabilities by the buyer in a merger may induce the seller to
demand a higher selling price. True or False
Answer:
Financial modeling refers to the application of spreadsheet software to define simple
arithmetic relationships among variables within the firm's income, balance sheet, and
cash-flow statements and to define the interrelationships among the various financial
statements. True or False
Answer:
Top management of the parents of a business alliance should not involve themselves
aggressively and publicly, as this may tend to stifle alliance management's risk taking
and creativity. True or False
Answer:
Integration of a new business into an existing one rarely affects current operations of
either business. True or False
Answer:
If individual country's capital markets are segmented, the global capital asset pricing
model must not be adjusted to reflect the tendency of investors in individual countries
to hold local country rather than globally diversified equity portfolios. True or False
Answer:
Because term loans are negotiated privately between the borrower and the lender, they
are much more expensive than the costs associated with floating a public debt or stock
issue. True or False
Answer:
An investor in a small company generally has little difficulty in selling their shares
because of the high demand for small businesses. True or False
Answer:
A subsidiary merger is a merger of two companies where the target company becomes a
subsidiary of the parent. True or False
Answer:
The disadvantages of the forward triangular merger may include the requirement of the
buyer to get shareholder approval. True or False
Answer:
Employees or so-called "human capital" are often the most valuable asset of the target
firm. True or False
Answer:
The life of the LLC is determined by the owners and is generally set for a fixed number
of years in contrast to the typical unlimited life for a corporation. True or False
Answer:
