Question : Smart Products Suppose Smart Products has three divisions which contribute 40, : 1325811

 

 

Smart Products

Suppose Smart Products has three divisions which contribute 40, 35, and 25 percent each to its revenues.

 

18.What is Smart Products’ Herfindahl Index on focus?

a.1.0

b.0.40

c.0.345

d.0.333

 

 

 

19.Now suppose Smart Products acquires a competitor of one of its divisions and the new shares of revenues are 60, 25, and 15 percent. Is Smart Products more or less focused?

a.less focused; the HI increases to 0.445

b.less focused; the HI decreases to 0.25

c.more focused; the HI decreases to 0.25

d.more focused; the HI increases to 0.445

 

 

 

20.FASB Statement 141 holds that

a.goodwill is to be amortized over time.

b.goodwill can no longer be created in merged financial statements.

c.goodwill can be increased or decreased over time after the merger.

d.goodwill is to be regularly evaluated for impairment.

 

 

 

21.Stock market evidence reveals

a.target shareholders receive larger premia in mergers than tender offers.

b.target shareholders’ returns have decreased over time.

c.target shareholders receive larger premia when there are multiple bidders.

d.target shareholders receive smaller premia when target management resists.

 

 

 

22.Recent stock market evidence reveals

a.target and bidder shareholders receive significant positive returns.

b.target shareholders receive significant positive returns, while acquirers’ returns are actually negative.

c.acquiring firms’ shareholders receive a larger share than target shareholders of the increased value of the combined firms.

d.acquirers’ returns have been increasing over time.

 

 

 

23.If you were the shareholder in a firm that became the target of an acquisition bid, which method of payment would stock market evidence suggest signals a better deal?

a.stock swap

b.stock/cash mixture

c.cash for stock

d.all, if the price is right

 

 

 

24.Which of the following is (are) not value-enhancing motives for mergers and acquisitions?

a.external expansion

b.economies of scale and/or scope

c.diversification

d.managerial synergies

 

 

 

25.Conglomerate mergers may be explained by which of the following?

a.seeking financial synergies

b.availability of free cash flow

c.diversification/risk reduction

d.all of the above

 

 

 

26.A transaction in which two or more business organizations combine into a single entity is called a(n)

a.acquisition

b.merger

c.consolidation

d.none of the above

 

 

 

27.The transformation of a public corporation into a private company by the employees of the corporation itself is called a(n)

a.management buyout

b.employee stock ownership plan

c.reverse LBO

d.reverse merger

 

 

 

28.Antitakeover measures in a corporate charter are called

a.shark repellents

b.bear hugs

c.poison pills

d.white knights

 

 

 

29.A merger that combines companies with similar but not identical lines of business is called a

a.product extension merger

b.pure conglomerate merger

c.vertical merger

d.none of the above

 

 

 

30.If GM were to merge with Wal-Mart, this would be called a

a.vertical merger

b.product extension merger

c.pure conglomerate merger

d.none of the above

 

 

 

 

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