1. A company received $5,000 invoice for consulting services it had received.

The
company chooses to use its business credit card instead of paying cash. Under
the accrual method of accounting, will the use of credit card result in the
company having more working capital? NO
2. A company has current assets of Cash of $40,000, Accounts Receivable of
$80,000 and inventory of $60,000 . The total of its current liabilities is $120,000.
Quick Ratio is. 1:1
3. Which of the following is not a principle of free enterprise economy?
C. A major government role
4. The organized exchange of the ownership shares of public corporations is a
D. Stock Market
5. The length of time invested money is controlled by others is known as term
6. ________ is one that combines two companies in the same industry
Horizontal merger
7. ________ combines a firm with a supplier or distributor Vertical merger
8. ________ combined two companies that have no related product of market
Conglomerate merger
9. A ________ is the partial or full disposal of a business unit through sale,
exchange or bankruptcy Divestiture
10. Capital budgeting is a decision making process of selecting both short term and
long term investments. False
11. One disadvantage of the payback method is it ignores time value of money. True
12. If the NPV is positive, the project's cost is more than its expected benefits. False
13. A significant advantage of the net present value is that it. Fully considers time
value of money
14. Suppose that the market price of company x is $41 per share. 1.125
15. If a (an) _ firm typically working with an investment. IPO
16. Firms using ________ fend off an acquisition by taking over the firm or firms
bidding for them. The Pacman defense
17. Managers of bidding firms continue to engage in merger or acquisition strategies
even though they usually do not generate profits for bidding firms in order to...
Ensure survival
18. A ________ is a compensation arrangement between a firm and its senior
management team that promises these individuals substantial cash payment if
their firm is acquired and they lose their jobs in the process.... Golden
Parachute
19. A_______ is another bidding firm that agrees to acquire a particular target in the
place of the original bidding firm.... White knight
20. If P&G's bid for Gillette was invited by Gillette's management, this would be an
example of a... Friendly acquisition
21. The most significant challenge P&G is likely to face in integrating each of the
acquired companies into P&G's operations is likely to be ________ differences
between P&G and each of the companies... Cultural
 22. Which of the following would be consistent with a more aggressive approach to
financing working capital? Financing some long-term needs with short-term
funds.
23. Spontaneous financing includes... Accounts payable
24. Net working capital refers to... Current assets minus current liabilities

What is the difference between a merger and an acquisition? *

A: A merger is a type of acquisition

Firms using ________ fend off an acquisition by taking over the firm or firms bidding
for them. *
A: the Pac Man Defense

Which of the following is a financial motivation for why bidding firms might want to
engage in merger and acquisition strategies? *
A: To increase leverage opportunities

The length of time invested money is controlled by others is known as

the______________. *
A: Term

If the NPV is positive, the project's cost is more than its expected benefits. *
A: False

What term is often used in stock plans to denote an M&A transaction that can affect
outstanding equity awards? *
A: Change in (or of) control

Suppose that the market price of Company X is $45 per share and that of Company Y
is $30. If X offers three-fourths a share of common stock for each share of Y, the ratio
of exchange of market prices would be: *
A: 1.125

If P&G's bid for Gillette was invited by Gillette's management, this would be an
example of a *
A: friendly acquisition

A firm engages in a(n) ________ when it purchases a second firm. *

A: Acquisition

Which of the following illustrates the use of a hedging (or matching) approach to
financing? *
A: Permanent working capital financed with long-term liabilities.

A ________ is a compensation arrangement between a firm and its senior

management team that promises these individuals substantial cash payment if their
firm is acquired and they lose their jobs in the process. *
A: golden parachute

If there are no vertical, horizontal, product extension, or market extension links

between firms, the FTC defines the merger or acquisition activity between firms as a
________ merger. *
A: conglomerate

Which of the following would be consistent with a more aggressive approach to

financing working capital? *
A: Financing some long-term needs with short-term funds.

A ______________ is the partial or full disposal of a business unit through sale,

exchange, closure, or bankruptcy. *
A: Divestiture

One means for a company to "go private" is *

A: the leveraged buyout (LBO)
Determine the payback period for a Php20,000 project that is expected to return
Php6,000 for the first two years and Php3,000 for years 3 through 5. *
A: 4.67 years

Give at least 4 types of divestitures

A: Spin-off Split-off Liquidation Going Private and Leveraged Buyout Carve-out and
Trade Sale

A significant advantage of the net present value is that it _______. *

A: fully considers time value of money

The present value of an investment's future cash flows divided by the initial cost of the
investment is called the _______. *
A: Profitability index

Which asset-liability combination would most likely result in the firm's having the
greatest risk of technical insolvency? *
A: Reducing current assets, increasing current liabilities, and reducing long-term debt.