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21.
Down River Markets has decided to acquire a controlling interest in Blue
Jays by purchasing shares of stock in the public markets. Which of the
following statements correctly apply to this acquisition?
I. The purchase of publicly-traded shares may be more expensive than an
outright merger with Blue Jays would have been.
II. Down River Markets can avoid dealing with the board of directors of Blue
Jays by purchasing shares in this manner.
III. If Down River Markets is successful in acquiring at least 80 percent of
the outstanding shares of Blue Jays, the remaining shareholders in Blue
Jays will be forced to also sell their shares to Down River Markets.
IV. Whether or not Down River Markets gains control of Blue Jays depends
upon the willingness of Blue Jays shareholders to sell their shares.
22.
Biltwell Hotels is acquiring all of the assets of Green Roof Inns. As a result,
Green Roof Inns:
23.
An auto maker recently acquired a windshield manufacturer. Which type of
an acquisition was this?
24.
If General Electric, a highly diversified company, were to acquire Ocean
Freight Limited, the acquisition would be classified as a _____ acquisition.
25.
If Paul's Hardware were to acquire Suburban Hardware, the acquisition
would be classified as a _____ acquisition.
26.
Which of the following is a form of a takeover?
I. tender offer
II. merger
III. proxy contest
IV. going private transaction
27.
Firms A and B formally agree to each put up $25 million to create firm C.
Firm C will perform environmental testing on the products produced by both
Firm A and Firm B. Which one of the following terms describes Firm C?
28.
Dixie and ten of her wealthy friends formed a group and borrowed the funds
necessary to acquire 100 percent of the outstanding shares of Southern
Fried Chicken. This transaction is known as a:
29.
In a tax-free acquisition, the shareholders of the target firm:
30.
Which of the following are required for an acquisition to be considered tax-
free?
I. continuity of equity interest
II. a business purpose, other than avoiding taxes, for the acquisition
III. payment in the form of equity shares for the acquired firm
IV. cash payment for the equity of the acquired firm
31.
Which one of the following statements is correct?
32.
The purchase accounting method requires that:
33.
For financial statement purposes, goodwill created by an acquisition:
34.
The pooling of interests method of accounting:
I. creates an account called goodwill which is recorded on the balance sheet
of the merged firm.
II. consists of simply combining the balance sheets of the acquiring and the
target firm.
III. is currently the accounting method required by FASB for all cash
acquisitions.
IV. recognizes the excess of the purchase price over the fair market value
and records that excess as an asset of the acquiring firm.
35.
The incremental cash flows of a merger can relate to changes in which of
the following?
I. revenue
II. capital requirements
III. operating costs
IV. income taxes
36.
Which of the following are examples of cost reductions that can result from
an acquisition?
I. allocating fixed overhead across a wider range of products
II. lowering office payroll costs by combining job functions
III. benefiting from economies of scale when purchasing raw materials
IV. reducing the number of management personnel required
37.
A potential merger which produces synergy:
38.
A proposed acquisition may create synergy by:
I. increasing the market power of the combined firm.
II. improving the distribution network of the acquiring firm.
III. providing the combined firm with a strategic advantage.
IV. reducing the utilization of the acquiring firm's assets.
39.
Which of the following represent potential tax benefits that can directly
result from an acquisition?
I. an increase in depreciation expense
II. an increase in surplus funds
III. the use of net operating losses
IV. an increased use of leverage
40.
When evaluating an acquisition you should:
