Mergers And Acquisitions Quiz

10 Questions | By Mehtajimmit | Updated: Sep 4, 2022 | Attempts: 8262

Questions

Settings

What do you know about mergers and acquisitions? If you think you have enough knowledge of this subject, take our "Mergers and Acquisitions Quiz" and try to score as much as possible. Mergers and acquisitions (M&A) in corporate finance describe the financial transactions between two companies. This quiz asks basic questions about (M&A). At the end of the quiz, you will not only check your understanding of it but also learn a few things from here. Best of luck!

Questions and Answers

1.

Which of the following is typically the most important economy or synergy which is sought from Mergers and Acquisitions' M&A activity?
- A.
  
  Economies of scope from applying existing resources to new uses, at little additional cost.
- B.
  
  Revenue and marketing synergies from new, enhanced, or more efficient distribution.
- C.
  
  Economies of scale effects from organizational learning. d) Economies of scale from doing away with duplication of fund.
- D.
  
  Economies of scale from doing away with duplication of function between the two firms.
2.

Which of the following would be a legitimate stated reason for an acquisition?
- A.
  
  The acquisition of critical mass
- B.
  
  Hubris
- C.
  
  Empire building
- D.
  
  The acquisition of monopoly
3.

When British Airways merged with Iberia, the Spanish airline, what kind of merger was this?
- A.
  
  Vertical
- B.
  
  Horizontal
- C.
  
  Joint venture
- D.
  
  Conglomerate
4.

Which of the following would not be acquired from a target company in the event of a takeover?
- A.
  
  Target company equity
- B.
  
  Target company asset
- C.
  
  Target company liabilities
- D.
  
  Target company shares price premium
5.

What is a leveraged buyout?
- A.
  
  It is a type of joint venture.
- B.
  
  It is an acquisition in which a large acquirer has leverage through bargaining power over a small target.
- C.
  
  It is an acquisition that is funded from a relatively large amount of debt.
- D.
  
  It is an acquisition that is funded from a relatively low amount of debt.
6.

What is a merger?
- A.
  
  No difference
- B.
  
  A merger is when one firm separates to become two.
- C.
  
  A merger is when two firms combine and form a new legal entity.
- D.
  
  A merger is when a firm changes its title.
7.

When the company is acquired, what difference does it make to contributions in an employee stock purchase plan (ESPP)?
- A.
  
  Contributions are automatically rolled over into the ESPP of the current company.
- B.
  
  The offering and purchase periods are cut off early, and just before the closing of the deal, a purchase is made.
- C.
  
  Both A and B
- D.
  
  None of these
8.

When the company is acquired, in what ways can vested stock options be handled?
- A.
  
  Can be changed into restricted stock units or stock appreciation rights. It depends on the terms of the stock plan.
- B.
  
  They can be occurred earlier to align their grant price with the grant price of the acquirer’s options.
- C.
  
  According to an exchange ratio, they can be rolled over into options in the acquirer.
- D.
  
  All of these options are correct.
9.

In an acquisition, what is the meaning of the typical tax treatment of stock options?
- A.
  
  If the options are still preserved after the deal, then there is no tax consequence, but if they would be cashed out directly to you, the payment has to be taxed as ordinary income.
- B.
  
  If the options are still preserved after the deal, then there would be no tax consequence, but if they have been cashed out directly to you, then the payment has to be taxed as capital gain.
- C.
  
  You would pay taxes on the full value of the options, both unvested and vested, as decided by a standard option-valuation model.
- D.
  
  You would not pay taxes on the full value of the options, both unvested and vested, as decided by a standard option-valuation model.
10.

Why do companies engage in M&A?
- A.
  
  For better brand recognition
- B.
  
  To grow in size and bounce their rivals
- C.
  
  Because of increasing competition
- D.
  
  All of these