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Chapter 7 Quiz

Total questions: 15

Worksheet time: 5mins

Name
Class
Date
1.

A process of validating the representations made by a seller, normally to an investor

a)

Merger

b)

Due Diligence

c)

Acquisition

d)

Other Valuation Technique

2.

The target's value is calculated based on the projected future cash flows with appropriate discount rate

a)

Discounted Cash Flow

b)

Comparable Company Analysis

c)

Economic Value Added

d)

Comparable transaction analysis

3.

When two companies merged coming from different stages of production or value chain

a)

Vertical Merger

b)

Horizontal Merger

c)

Conglomerate Merger

d)

Diagonal Merger

4.

The parent company offers shareholders the option to keep their current shares or exchange them for shares of the divesting company

a)

Split off

b)

Equity carve out

c)

Divestiture

d)

Spin off

5.

This is concerned with the legal and financials of the company under evaluation. So essentially, this is quantitative, which measurement can be normally done by use of mathematical calculation.

a)

Soft Due Diligence

b)

Combined Due Diligence

c)

Hard Due Diligence

d)

Semi-Hard Due Diligence

6.

Serves as the best document to support the financial performance and financial position of the company including their cash flows.

a)

Market Capitalization

b)

Financial Statement

c)

Stock Price History

d)

Market Expectations

7.

It tends to fluctuate a lot due to evolving market conditions which make it extremely subjective.

a)

Income-based valuation

b)

Dividend paying capacity method

c)

Return on investment based valuation

d)

Divestiture

8.

A corporate strategy that allows company to combine its assets to another company or to acquire another company

a)

Mergers and Acquisitions

b)

Consolidation

c)

Perfect Combination

d)

Due diligence

9.

When parent purchases more interest from its subsidiary

a)

Subsidiary M&As

b)

Statutory M&As

c)

Short-form M&As

d)

Basic M&As

10.

The following are the top reasons why companies entered M & A's except:

a)

Manage the Cost Capital

b)

Economics of Scale

c)

Expansion and Growth

d)

Technological advancement

11.

The due diligence team is composed of

a)

Librarian, Teachers and Electricians

b)

Lawyers, Auditors, and Technical experts

c)

Doctors, Nurses, and Scientist

d)

Musicians, Actors, and Pianists

12.

To be tax free in the future spin off you should not offer more than ______ percent of the stocks to IPO during carve out.

a)

80%

b)

20%

c)

30%

d)

70%

13.

The partial divestiture of a business unit in which a parent company sells a minority interest of a subsidiary to outside investors.

a)

Spin off

b)

Split off

c)

Partial sell off

d)

Equity carve out

14.

With that law, securities dealers and brokers became responsible for fully disclosing material information about instruments they were selling.

a)

Securities Act of 1933

b)

Securities Act of 1900

c)

Securities Act of 2000

d)

Sarbanes-Oxley Act

15.

It is the action or process of selling off subsidiary business interest or investments

a)

Due diligence

b)

Divestiture

c)

Mergers and acquisitions

d)

ROI based valuation