Question :
121.Which of the following postulates that top managers typically overestimate : 1299444
121.Which of the following postulates that top managers typically overestimate their ability to create value from an acquisition?
A. Bandwagon effect
B. Fisher effect
C. Hubris hypothesis
D. International Fisher effect
E. Learning effect
122.Which of the following is a reason why firms often overpay for the assets of an acquired firm?
A. Studies supporting the rise of failed companies post acquisitions
B. Evidence of high management turnover post acquisitions
C. The success rate of acquisitions exceeding that of failures
D. Interest of more than one party in acquiring a particular firm
E. Inevitable clash between cultures of acquiring and acquired firms
123.The management of an acquiring firm is often too optimistic about the value that can be created via an acquisition and is thus willing to pay a significant premium over a target firm’s market capitalization. This is known as the _____ and is the reason why acquisitions fail.
A. bandwagon effect
B. Fisher effect
C. hubris hypothesis
D. international Fisher effect
E. learning effect
124.Which of the following is a reason why acquisitions, a mode of entering foreign markets, fail?
A. There is a clash between the cultures of the acquiring and acquired firm.
B. Acquisitions take a long time to execute.
C. Acquisitions are easily preempted by making greenfield investments.
D. The revenue and profit stream generated by an acquisition’s resources is usually unknown.
E. Losses produced by intangible assets outweigh profits from acquired tangible assets.
125.Spring, an American firm, recently acquired another company known as Tazel Inc. in Indonesia. The high-level managers at Tazel Inc. quit because they could not cope with the domineering and straightforward approach of their American counterparts. This illustrates how acquisitions may fail because:
A. managers overestimate their ability to create value from an acquisition.
B. integration of operations between the two firms takes longer than forecasted.
C. there is a clash between the cultures of the acquired and the acquiring firm.
D. an acquiring firm overpays for the assets of an acquired firm.
E. inadequate pre-acquisition screening has been done.
126.Which of the following is a way in which the risk of failure of an acquisition can be reduced?
A. By undervaluing the assets of an acquired firm
B. By ensuring that firms are acquired in the home country
C. By replacing high-level managers of an acquired firm
D. By a detailed auditing of operations, financial position, and management culture
E. By investing only in a firm that is managing to break even
127.Which of the following is an advantage of acquisitions as a means of entry into foreign markets?
A. When a firm makes an acquisition, it buys a set of assets that are producing a known revenue.
B. Acquiring firms underpay for the assets of the acquired firm.
C. After an acquisition, many acquired companies face a rise in recruitments.
D. Integrating the operations of the acquired and acquiring entities often takes a short period of time.
E. Most acquisitions succeed due to detailed pre-acquisition screening.
128.To reduce the risks of failure of an acquisition, managers must:
A. pay more for the acquired unit to please its existing employees.
B. encourage and facilitate management turnover.
C. acquire a firm without wasting time on screening.
D. move rapidly after an acquisition to put an integration plan in place.
E. ensure that the work cultures are significantly different from each other.
129.An advantage of a(n) _____, a mode of entry into foreign markets, is that it provides a firm with much greater ability to build the kind of subsidiary company that it wants.
A. acquisition
B. merger
C. franchise
D. greenfield venture
E. turnkey project
130.An advantage of a(n) _____ as a mode of entry into foreign markets is that it is much easier to build an organization culture from scratch than it is to change the culture of an acquired unit.
A. joint venture
B. greenfield venture
C. merger
D. acquisition
E. turnkey project
