Corporate Finance

Stock-based insolvency is a:

• a: income statement measurement

• b: balance sheet measurement.

• c: only a book value measurement.

• d: Both A and C.

• e: Both B and C.

Flow-based insolvency is

• a: a balance sheet measurement.

• b: a negative equity position.

• c: when operating cash flow is insufficient to meet current obligations.

• d: inability to pay one’s debts.

• e: Both C and D.

Financial restructuring can occur as:

• a: a private workout

• b: an employee buy-out.

• c: a bankruptcy reorganization.

• d: Both A and C.

• e: Both B and C.

Financial distress can involve which of the following

• asset restructuring

• financial restructuring

• liquidation.

• All of the above.

The difference between liquidation and reorganization is:

• reorganization terminates all operations of the firm and liquidation only terminates non-profitable operations.

• liquidation terminates only profitable operations and reorganization terminates only

  non-profitable operations

• liquidation terminates all operations and reorganization maintains the option of the firm going concern.

• liquidation only deals with current assets and reorganization only consolidates debt.

• None of the above.

Prepackaged bankruptcies are:

• described as a combination of a private workout and a liquidation.

• the easiest way to transfer wealth to the shareholders.

• described as a combination of a completed private workout and the formal bankruptcy filing.

• All of the above.

• None of the above.

The complete absorption of one company by another, wherein the acquiring firm retains its identity and the acquired firm ceases to exist as a separate entity, is called

• merger.

• consolidation.

• tender offer.

• spinoff.

• divestiture.

A merger in which an entirely new firm is created and both the acquired and acquiring firms cease to exist is called a:

• divestiture.

• consolidation.

• tender offer.

• spinoff.

• conglomeration

The acquisition of a firm in the same industry as the bidder is called a _____ acquisition

• conglomerate

• forward

• backward

• horizontal

• vertical

An attempt to gain control of a firm by soliciting a sufficient number of stockholder votes to replace the current board of directors is called a:

• tender offer.

• proxy contest.

• going-private transaction.

• leveraged buyout.

• consolidation.