Chapter 1- Intercorporate Acquisitions and Investments in Other Entities Exam Questions with Detailed Answers Already Passed
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Chapter 1- Intercorporate Acquisitions and Invest
Institution
Chapter 1- Intercorporate Acquisitions And Invest
Chapter 1- Intercorporate Acquisitions and Investments in Other Entities Exam Questions with Detailed Answers Already Passed
What is a subsidiary company?
a. A private company that another corporation, referred to as a parent company, controls through minority ownership of its common stock.
b....
Chapter 1- Intercorporate Acquisitions and Investments in Other Entities Exam Questions with
Detailed Answers Already Passed
What is a subsidiary company?
a. A private company that another corporation, referred to as a parent company, controls through
minority ownership of its common stock.
b. A corporation that an individual controls, usually through minority ownership of its preferred stock.
c. An individual that works for a company, usually owned by other companies and controlled through
majority ownership of its bonds.
d. A corporation that another company, referred to as a parent company, controls, usually through
majority ownership of its common stock. - Answers d
Select all that apply.
Which of the following should a company do to reduce its risk of collecting receivables?
a. It should transfer its receivables to a special-purpose entity.
b. It should change its capital structure.
c. It should create or acquire a subsidiary and transfer its receivables to a subsidiary.
d. It should change its accounting method from accrual to cash. - Answers a, c
A special-purpose entity is, in general,
a. an individual that works for a company, usually owned by other companies and controlled through
majority ownership of its bond.
b. a private company that another corporation controls through minority ownership of its common
stock.
c. a substantive operating entity that is not a financing vehicle.
d. a financing vehicle that is not a substantive operating entity. - Answers d
Select all that apply.
Which of the following are reasons for a company to establish new subsidiaries?
a. To protect itself from exposing the entire company's assets to legal liability
b. To establish clear lines of control
c. To qualify for special tax incentives
, d. To protect itself from inflation risk - Answers a, b, c
Select all that apply.
Which of the following is a similarity between a spin-off and a split-off?
a. Both types of divestiture result in a reduction of consolidated assets and liabilities.
b. Both types of divestiture involve the exchange of shares of the parent for shares of the subsidiary.
c. Both types of divestiture result in a reduction in the parent company's outstanding shares.
d. Both types of divestiture are used as a means of disposing of unprofitable operations. - Answers a, d
A(n) ___________ is a corporation that another corporation, referred to as a(n) _____________
company, controls, usually through majority ownership of its common stock. - Answers subsidiary;
parent
Select all that apply.
Identify the reasons for business combinations.
a. To acquire the position to direct the policies of another company
b. To obtain control over the management of another company
c. To create a healthy competition with the acquired company
d. To generate the income from another company by investing idle cash in the business - Answers a, b
Select all that apply.
Why do companies transfer their receivables to subsidiaries?
a. It leads to an increase in the share price of transferring companies.
b. It leads to tax benefits for the transferring companies.
c. It allows transferring companies to share the risk associated with the receivables.
d. It allows the subsidiary to use the receivables as collateral for bonds issued to other entities. -
Answers b, c, d
Select all that apply.
Which of the following are true of special-purpose entities (SPEs)?
a. They may be in the form of corporations, trusts, or partnerships.
b. They are usually created for a single specified purpose.
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