Exam 4

In __________ bankruptcy the firm's current management is given the opportunity to devise and propose an acceptable reorganization plan. Chapter 11 Chapter 13 Chapter 7

Chapter 11

In __________ bankruptcy, the court appoints a trustee to oversee the liquidation of a firm's assets. Chapter 13 Chapter 7 Chapter 11

Chapter 7

A(n) __________ is a pro rata cash settlement that may be negotiated when a firm is in financial distress. extension composition liquidation

composition

Simply Soft Drinks acquires Green's Shoe Stores, Inc. This is a __________ merger. vertical conglomerate horizontal

conglomerate

When a firm files bankruptcy, it is common for suppliers to suspend trade credit. To enable the firm to continue operating, the court may allow the bankrupt firm to issue new debt that is senior to all existing debt. The new debt is called __________. Trade credit financing debtor in possession (DIP) financing subordinated debentures

debtor in possession (DIP) financing

Business failure may be caused by: lower tax rates. economic downturns. higher liquidity.

economic downturns.

A(n) __________ is an arrangement whereby the firm's creditors receive full payment, although not immediately. composition liquidation extension

extension

In a leveraged recapitalization, a company may avert a hostile takeover by: adopting anti-takeover amendments. approving a golden parachute for the CEO. paying a large cash dividend with borrowed funds.

paying a large cash dividend with borrowed funds.

In defending against a hostile takeover, the strategy that involves the target firm creating securities that give their shareholders certain rights that become effective when a takeover is attempted is called the __________ strategy. poison pill greenmail golden parachute

poison pill

When a firm is fielding an offer for a friendly takeover the board will recommend approval and then the: shareholders receive their cash from the tender offer merger occurs shareholders will vote on the merger

shareholders will vote on the merger

A(n) __________ is a form of divestiture in which an operating unit becomes an independent company. LBO vertical merger spin-off

spin-off

A formal proposal to purchase a given number of shares of a firm's stock at a specified price is a __________. tender offer call option warrant

tender offer

A hostile merger is usually accomplished through a: board vote tender offer bond purchase

tender offer

The board of directors might oppose an acquisition for legitimate reasons if they believe: the price is too high management will be fired the price is too low

the price is too low

The most common justifications given for acquiring a firm are: to benefit from an increase in firm size gains from reduced government regulation the synergies gained through the acquisition

the synergies gained through the acquisition

A tender offer in which the terms offered to those who accept early are more attractive than the terms offered to those accept later is termed a ______ offer. two-tier premium white knight poison pill

two-tier

Simply Soft Drinks acquires Louisiana Sugar Cane Inc. This is a __________ merger. conglomerate horizontal vertical

vertical

Eastern Engines is attempting a takeover of Midway Motors. The board of Midway does not want to have Eastern Engines acquire it so Midway approaches International Instruments to see if International Instruments would be willing to acquire it instead. International Instruments would be known as a(n) __________. golden parachute white knight Raider

white knight

Gordon Creedo announces a tender offer for half of the outstanding shares of Holiday Cruise Line for $35 a share. He borrows money through a shell corporation by pledging the shares themselves as collateral for the loan. This is known as a __________. white knight horizontal merger leveraged buyout

leveraged buyout

In a voluntary settlement, the firm bypasses the bankruptcy process and the associated costs and works with its creditors to draft a plan to: solicit financial help from the appropriate government authority. ensure the firm's management is properly compensated. liquidate the firm's assets or continue operations.

liquidate the firm's assets or continue operations.

The primary cause of business failure is __________. overexpansion mismanagement fraud

mismanagement

_____ is a takeover defense under which a target firm repurchases, through private negotiation, a large block of stock as a premium from one or more shareholders to end a hostile takeover attempt by those shareholders. Greenmail A poison pill Leveraged recapitalization Golden parachutes

Greenmail

Which of the following mergers would be the best example of a vertical merger? United Airlines acquiring Continental Airlines Fossil Oil acquiring Ancient Ages Publishing Toyota acquiring Whitewall Tires

Toyota acquiring Whitewall Tires

Which of the following statements is most accurate concerned mergers? Mergers allow two companies to combine their financial assets, but rarely create strategic opportunities. Typically, companies pursue mergers for strategic or financial reasons. Mergers often limit shareholder wealth maximization.

Typically, companies pursue mergers for strategic or financial reasons.

Simply Soft Drinks acquires Real Cola. This is a __________ merger. conglomerate vertical horizontal

horizontal