Question 1

Leveraged buyouts are the same as acquisitions.

Accepted Answer

A) True 
 B)False  False

Question 2

Briefly explain the difference between leveraged buyouts and leveraged restructurings.

Accepted Answer

The financial characteristics of LBOs and leveraged restructurings are similar. The three main characteristics of LBOs are: high debt, incentives to managers, and private ownership. Leveraged restructurings share the first two characteristics but continue to operate as public companies.

Question 3

The following are examples of LBOs EXCEPT:

Accepted Answer

A) BC Partners and PetSmart. 
B) Blackstone and Team Health Holdings. 
C) Fiat and Ferrari. 
D) All of these options are LBOs. 
A) BC Partners and PetSmart. 
B) Blackstone and Team Health Holdings. 
C) Fiat and Ferrari. 
D) All of these options are LBOs. C

Question 4

The following are examples of carve-outs except:

Accepted Answer

A) RWE and Innogy. 
B) 3Com and Palm. 
C) Altria and Philip Morris International. 
D) All of these options are examples of carve-outs. 
A) RWE and Innogy. 
B) 3Com and Palm. 
C) Altria and Philip Morris International. 
D) All of these options are examples of carve-outs.

Question 5

The simplest way to divest an asset is to

Accepted Answer

A) spin it off. 
B) carve it out. 
C) sell it. 
D) All of these methods are equally complex. 
A) spin it off. 
B) carve it out. 
C) sell it. 
D) All of these methods are equally complex.

Question 6

Two in-court options for dealing with firms in financial distress are

Accepted Answer

A) merger and acquisition. 
B) liquidation and reorganization. 
C) leasing and LBO. 
D) issuance of stocks or bonds. 
A) merger and acquisition. 
B) liquidation and reorganization. 
C) leasing and LBO. 
D) issuance of stocks or bonds.

Question 7

Which of the following statements is (are)true of limited partnerships?

Accepted Answer

A) Limited partners enjoy limited liability but do not participate in management. 
B) Generally, limited partners put up most of the money. 
C) Generally, limited partners are institutional investors. 
D) All of these statements are true of limited partnerships. 
A) Limited partners enjoy limited liability but do not participate in management. 
B) Generally, limited partners put up most of the money. 
C) Generally, limited partners are institutional investors. 
D) All of these statements are true of limited partnerships.

Question 8

Private-equity partnerships can cash out of companies in the partnership's portfolio in the following ways:
I.an IPO of portfolio companies;
II.a trade sale to another firm;
III.a carve-out of portfolio companies;

Accepted Answer

A) I only. 
B) II only. 
C) I and II only. 
D) III only. 
A) I only. 
B) II only. 
C) I and II only. 
D) III only.

Question 9

A major beneficiary of privatization is the government that receives the revenues from the sale.

Accepted Answer

A) True 
 B)False

Question 10

A privatization is a

Accepted Answer

A) sale of a government-owned company to private investors. 
B) sale of private companies to the government. 
C) sale of a publicly traded company to private investors. 
D) sale, by a private equity fund's limited partners, of their partnership stakes. 
A) sale of a government-owned company to private investors. 
B) sale of private companies to the government. 
C) sale of a publicly traded company to private investors. 
D) sale, by a private equity fund's limited partners, of their partnership stakes.

Question 11

The following are characteristics of a public conglomerate:
I.It is designed to operate various divisions for the long run.
II.It has an internal capital market wherein each division competes for funds.
III.A hierarchy of corporate staff evaluates divisions' plans and performance.
IV.Divisional managers' compensation depends mostly on earnings of their respective divisions.

Accepted Answer

A) I and II only 
B) I, II, and III 
C) II, III, and IV only 
D) I, II, III, and IV 
A) I and II only 
B) I, II, and III 
C) II, III, and IV only 
D) I, II, III, and IV

Question 12

What are some of the benefits of privatization?

Accepted Answer

There are three primary benefi

Question 13

Asset sales are common in

Accepted Answer

A) manufacturing. 
B) banking. 
C) services. 
D) None of these options are correct. 
A) manufacturing. 
B) banking. 
C) services. 
D) None of these options are correct.

Question 14

Briefly describe the role of the Securities and Exchange Commission (SEC)in bankruptcy reorganizations.

Accepted Answer

The SEC plays an important role in reorg

Question 15

Spin-offs are not taxed if the shareholders of the parent company are given at least

Accepted Answer

A) 90 percent of the shares in the new company. 
B) 80 percent of the shares in the new company. 
C) 70 percent of the shares in the new company. 
D) 60 percent of the shares in the new company. 
A) 90 percent of the shares in the new company. 
B) 80 percent of the shares in the new company. 
C) 70 percent of the shares in the new company. 
D) 60 percent of the shares in the new company.

Question 16

Which of the following are methods by which a company's structure can be modified?

Accepted Answer

A) LBOs and privatizations 
B) Privatizations 
C) LBOs and spin-offs and carve-outs 
D) LBOs, privatizations, spin-offs and carve-outs, and bankruptcies 
A) LBOs and privatizations 
B) Privatizations 
C) LBOs and spin-offs and carve-outs 
D) LBOs, privatizations, spin-offs and carve-outs, and bankruptcies

Question 17

A "privatization" is the same type of transaction as taking a company private in an LBO.

Accepted Answer

A) True 
 B)False

Question 18

The Securities and Exchange Commission (SEC)usually plays an important role in the reorganization of large, public companies by ensuring that all relevant and material information is disclosed to creditors before they vote on the proposed reorganization plan.

Accepted Answer

A) True 
 B)False

Question 19

The following are important motives for privatization EXCEPT:

Accepted Answer

A) revenue for the government. 
B) increased efficiency. 
C) share ownership. 
D) economies of scale. 
A) revenue for the government. 
B) increased efficiency. 
C) share ownership. 
D) economies of scale.

Question 20

Which of the following statements regarding spin-offs and carve-outs is not true?

Accepted Answer

A) Spin-offs are not taxed if the shareholders of the parent company are given a majority of shares in the new company. 
B) Spin-offs are not taxed if the shareholders of the parent company are given at least 80 percent of the shares in the new company. 
C) Gains or losses from carve-outs are taxed at the corporate tax rate. 
D) In carve-outs, the parent company retains majority control. 
A) Spin-offs are not taxed if the shareholders of the parent company are given a majority of shares in the new company. 
B) Spin-offs are not taxed if the shareholders of the parent company are given at least 80 percent of the shares in the new company. 
C) Gains or losses from carve-outs are taxed at the corporate tax rate. 
D) In carve-outs, the parent company retains majority control.

Exam 32: Corporate Restructuring

Leveraged buyouts are the same as acquisitions.

Briefly explain the difference between leveraged buyouts and leveraged restructurings.

The following are examples of LBOs EXCEPT:

The following are examples of carve-outs except:

The simplest way to divest an asset is to

Two in-court options for dealing with firms in financial distress are

Which of the following statements is (are)true of limited partnerships?

Private-equity partnerships can cash out of companies in the partnership's portfolio in the following ways: I.an IPO of portfolio companies; II.a trade sale to another firm; III.a carve-out of portfolio companies;

A major beneficiary of privatization is the government that receives the revenues from the sale.

A privatization is a

What are some of the benefits of privatization?

Asset sales are common in

Briefly describe the role of the Securities and Exchange Commission (SEC)in bankruptcy reorganizations.

Spin-offs are not taxed if the shareholders of the parent company are given at least

Which of the following are methods by which a company's structure can be modified?

A "privatization" is the same type of transaction as taking a company private in an LBO.

The Securities and Exchange Commission (SEC)usually plays an important role in the reorganization of large, public companies by ensuring that all relevant and material information is disclosed to creditors before they vote on the proposed reorganization plan.

The following are important motives for privatization EXCEPT:

Which of the following statements regarding spin-offs and carve-outs is not true?

Introduction to Corporate Finance

How to Calculate Present Values

Valuing Bonds

The Value of Common Stocks

Net Present Value and Other Investment Criteria

Making Investment Decisions With the Net Present Value Rule

Introduction to Risk and Return

Portfolio Theory and the Capital Asset Pricing Model

Risk and the Cost of Capital

Project Analysis

How to Ensure That Projects Truly Have Positive Npvs

Agency Problems and Investment

Efficient Markets and Behavioral Finance

An Overview of Corporate Financing

How Corporations Issue Securities

Payout Policy

Does Debt Policy Matter

How Much Should a Corporation Borrow

Financing and Valuation

Understanding Options

Valuing Options

Real Options

Credit Risk and the Value of Corporate Debt

The Many Different Kinds of Debt

Leasing

Managing Risk

Managing International Risks

Financial Analysis

Financial Planning

Working Capital Management

Mergers

Governance and Corporate Control Around the World

Filters