Question 1. Which of the following is defined as a transaction in which two firms combine to form a single firm? 

1. Which of the following is defined as a transaction in which two firms combine to form a single firm?
A. merger
B. synergy
C. acquisition
D. assignment

2. Which of the following is defined as the purchase of one firm by another firm?
A. merger
B. synergy
C. acquisition
D. assignment

3. Which of the following is a type of merger in which an entirely new firm is created?
A. composition
B. synergy
C. consolidation
D. assignment

4. Which of the following is a type of merger in which two firms that sell the same products in different market areas are combined?
A. vertical
B. conglomerate
C. product extension
D. market extension

5. Which of the following is a combination of a firm with a supplier or distributor?
A. vertical merger
B. conglomerate merger
C. product extension merger
D. market extension merger

6. Which of the following combines two companies that have no related products or markets?
A. vertical merger
B. conglomerate merger
C. product extension merger
D. market extension merger

7. Which of the following is a combination of firms that sell different, but somewhat related, products?
A. vertical merger
B. conglomerate merger
C. product extension merger
D. market extension merger

8. Which of these terms is defined as the value of the combined firms being greater than the sum of the value of the two firms individually?
A. composition
B. synergy
C. consolidation
D. conglomerate

9. Which of the following is NOT one of the sources of value enhancing synergy in a merger?
A. revenue enhancement
B. cost reduction
C. tax considerations
D. higher cost of capital

10. Which of the following is defined as a merged firm’s ability to generate synergistic cost savings through the joint use of inputs in producing multiple products?
A. economies of scale
B. economies of scope
C. economies of synergy
D. x-efficiencies

11. Which of the following is defined as a merged firm’s advantage over smaller firms if cuts associated with the merger lower the firm’s operating costs of production?
A. economies of scale
B. economies of scope
C. economies of synergy
D. x-efficiencies

12. Which of the following is cost savings usually attributed to superior management skills and other difficult-to-measure managerial factors?
A. economies of scale
B. economies of scope
C. economies of synergy
D. x-efficiencies

13. Which of the following is NOT a tax consideration motive for a merger?
A. tax gains from net operating losses
B. tax gains from used debt capacity
C. tax gains from used equity capacity
D. tax gains from surplus firms

14. Which of these makes the following a true statement? Diversification resulting from a merger can:
A. Make the debt of the merged firm more risky, thus lowering the cost of capital.
B. Make the debt of the merged firm less risky, thus lowering the cost of capital.
C. Make the debt of the merged firm less risky, thus raising the cost of capital.
D. None of these make the statement true.

15. Which of the following is the most extreme type of financial distress for a business?
A. business failure
B. economic failure
C. technical insolvency
D. business extension

16. Which of the following is the type of financial distress in which the return on a firm’s assets is less than the firm’s cost of capital?
A. business failure
B. economic failure
C. technical insolvency
D. business extension

17. Which of the following is the type of financial distress in which a firm’s operating cash flows are not sufficient to pay its liabilities as they come due?
A. business failure
B. economic failure
C. technical insolvency
D. business extension

18. Which of the following is the termination of the firm as a going concern in which assets are sold and any proceeds go to pay off the firm’s creditors?
A. liquidation
B. assignment
C. composition
D. consolidation

19. Which of the following is a voluntary liquidation proceeding that passes the liquidation of the firm’s assets to a third party that is designated as the assignee or trustee?
A. liquidation
B. assignment
C. composition
D. consolidation

20. Which of these is the person who liquidates the firm’s assets through a private sale or public auction and then distributes any proceeds from the sale to the firms’ creditors and stockholders?
A. assignor
B. grantor
C. trustor
D. trustee

21. Which of the following is a formal bankruptcy proceeding which outlines the process to be followed for liquidating a failed firm?
A. Chapter 7
B. Chapter 11
C. Chapter 13
D. Chapter 179

22. Which of the following is a formal bankruptcy proceeding involving the reorganization of the corporation with some provision for repayment to the firm’s creditors?
A. Chapter 7
B. Chapter 11
C. Chapter 13
D. Chapter 179

23. Which of the following involves a firm and its creditors agreeing to a private reorganization outside the formal bankruptcy process?
A. consolidation bankruptcy
B. prepackaged bankruptcy

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