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PRE TEST IN SPECIAL TOPICS IN FINANCIAL MANAGEMENT

Quiz by ANDREA MARIE ALDUEZA

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50 questions
Show answers
  • Q1
    It is a bond or share of preferred stock that can be converted at the option of the holder into common stock of the same corporation.
    bonds
    debt
    convertible security
    warrants
    30s
  • Q2
    The ratio of exchange between the convertible security and the common stock can be stated in terms of either a _____.
    stock
    premium
    straight bond
    conversion price
    30s
  • Q3
    The current market price of the common stock of the mythical ABC Corporation is $40 per share. If the company raises capital with an issue of common stock, what would most likely happen?
    nothing will happen
    it will have to underprice the issue to sell it in the market.
    there will be no sale
    it will have to overprice the issue to sell it in the market.
    30s
  • Q4
    The convertible bond may be viewed as straight debt plus an option to purchase common stock in the corporation. If the expiration of the option and the maturity of the convertible are the same, then the following relationship roughly holds _____.
    Debt value + Premium value = Convertible bond value
    Bonds value + Premium value = Straight bond value
    Debt value + Premium value = Straight bond value
    Debt value + Option value = Convertible bond value
    30s
  • Q5
    It is the price at which a similar but nonconvertible bond of the same company would sell in the open market.
    debts
    warrants
    straight bond value
    convertible securities
    30s
  • Q6
    A common stock has exercise price of P10 per share, what is the theoretical value if the market price is at P12?
    P8
    P22
    P2
    P12
    30s
  • Q7
    Which is true about exchangeable bond?
    This method of financing is applicable to companies that have stock holdings in another company.
    It is like the convertible security in its valuation underpinnings with a couple of exceptions.
    All are true
    An exchangeable bond may be exchanged for common stock in another corporation.
    30s
  • Q8
    It is the combination of two companies in the same line of business.
    synergy
    horizontal merger
    conglomerate merger
    vertical merger
    30s
  • Q9
    It is the combination of two companies with unrelated line of business.
    synergy
    horizontal merger
    conglomerate merger
    vertical merger
    30s
  • Q10
    When does a strategic acquisition occur?
    when one company buyout a firm to make value higher than the purchase price
    when one company acquires another as part of its succession purposes.
    when one company acquires 5 companies at once
    when one company acquires another as part of its overall business strategy.
    30s
  • Q11
    When does a financial acquisition occur?
    when one company buyout a firm to make value higher than the purchase price
    when one company acquires another as part of its overall business strategy.
    when one company acquires 5 companies at once
    when one company acquires another as part of its succession purposes.
    30s
  • Q12
    If the market price of Acquiring Company is $60 per share and that of Bought Company is $30 and Acquiring Company offers a half share of its stock for each share of Bought Company, the ratio of exchange of market prices will be ____.
    0.5
    1.5
    1.00
    2.00
    30s
  • Q13
    A number of industries are being transformed owing to an increasingly popular merger and acquisition strategy is called ___.
    merger
    initial public offering
    roll-up
    capital budgeting
    30s
  • Q14
    In evaluating the prospective acquisition, the buying company should estimate the future cash flows that the acquisition is expected to add after taxes. We are interested in what is known as ___.
    mergers
    free cashflows
    roll up
    earnings per share
    30s
  • Q15
    Which of the folowing statements is true?
    If the acquisition is made with cash or with a debt instrument, the transaction is taxable to the selling company or to its shareholders at that time.
    When an acquiring company purchases the stock of another company, the latter is combined into the acquiring company.
    All are true
    A company may be acquired by the purchase either of its assets or of its common stock.
    30s

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