Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CMA 2 > SU5 - Corporate Restructuring and Int'l Finance > Flashcards

SU5 - Corporate Restructuring and Int'l Finance Flashcards

1
Q

Define a merger

A

The acquisition of of one firm by another

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q 
Define the 4 types of mergers
H
V
C
C
A

Horizontal - merger within the same line of business
Vertical - merger with a customer or supplier
Congeneric - merger with a related business
Conglomerate - merger between different industries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define an acquisition

A

the purchase of all of another firm’s assets or a controlling interest
-Asset purchase requires shareholder vote

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Define and explain a tender offer

A

When a purchase offer is rejected my mgmt, an acquiring firm may offer to purchase outstanding shares at a specific price
The resulting takeover attempts can be friendly r hostile

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Motiviation for M&A

A

Management my be notoified by the personal benefits from a larger firm or of being fired and replaced

Personal rewards/consequences may not reflect the best decision for the business/shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Opposing a combination:

Greenmail

A

A targeted repurchase of stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Opposing a combination:

Staggered BOD Elections

A

Requires new shareholders to wait several year to replace existing executives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Opposing a combination:

Golden Parachutes

A

Large payments to executives if they are fired

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Opposing a combination:

Fair Price provisions

A

Allows existing shareholders to purchase add’l stock at a large discount. Protects shareholder interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Opposing a combination:

LBOs and going private

A

Leveraged Buy Out: a firm is purchased with little equity (leverage = more debt)
GOing private - stock is delisted

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Opposing a combination:

Poison Pill

A

Corporate provisions that reduce the firm’s value to potential takeover

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Opposing a combinatin
Flip-Over rights
Flip-in rights

A

Over: rights of existing shareholder to exchange stk for a larger share of the acquiring firm
In: The purchase of a specific interest by the acquiring firm triggers add’l stock rights for existing s/h

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Opposing a combination
White Knight Merger
Crown Jewel Transfer

A

WK: mgmt arranged alternative tender offer
CJ: the firm rids itself of desirable assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Spin Off vs Divestirue

A

THey both create a new entity.
Spin-off: shares are distributed proportional to old s/h
Divestiture: through sale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q 
Chapter 7 Bankruptcy
Voluntary?
Eligible?
Ineligible?
Priority of Claims
A

Liquidation

  • Can be vountary or not
  • Individuals, partnerships and coprorations
  • municipalities, railroads, insurerrs banks and credit unions
  • admin expenses, suppliers after case b4 trustee, wages, emp benefit plans…… general creditors, shareholders
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Chapter 11 Bankruptcy
Voluntary
eligible
ineligible

A

Reorganization
- yes or no
- same as ch. 7 and railroads
Claims are divided into classes and treated equally

17
Q

How many exchange reate systems are there? Name them

A 
4
Fixed Rates
Freely floating rates
managed floating rates
pegged rates
18
Q

Fixed Exchange Rate System

A

Fixed exactly or within a limited range
Eliminates uncertaintity
Susceptible to gov’t manupulation

19
Q

Freely Floating Exchange Rate System

A

No intervention
Leaves countries wholly dependent on the economic conditions of other nations
Self Correcting

20
Q

Managed Float Exchange Rate System

A

Controlled by market forces within a wide range
Used by most trading nations
A mix of fixed and free float
Export nations are vulnerable to sudden changes

21
Q

Pegged Exchange Rate System

A

Rate is fixed to another currency or group of currencies

22
Q

Spot Rate

A

Today’s Exchange rate

23
Q

Forward Rate

Forward Premium

A

Future exchange rate

domestic currency buys more of a foreign currency in the forward market

24
Q

Calculating a forward premium/discount

Effect on purchasing power

A

((Forward Rate - Spot Rate)/Spot Rate) x (Days in Year/Days in Fwd Pd)
Forward premium - gain purchasing power
Discount - lose purchasing power

25
Q

Cross Rate

A

Used when two currencies are stated interms of each other, uses a 3rd currency the two have in common . Often USD

Domestic currency per USD/Foreign currency per USD

26
Q

Effective Interest Rate on Foreign Loan

A

((Loan amount in for curr x FX Rate) - (Loan amount in for curr x stated rate) x FX rate x Future FX rate))/((Loan amount in for curr x FX Rate)

27
Q

Country’s Balance of Payments

Relationship to currency valuation and exports

A

Net of all transactions between a domestic and foreign country
Weak Currency, Higher Exports, Positive Balance
Strong Currency, Lower Exports , Negative Balance

28
Q

What factors affect exchange rate

Trade -related

A
  • Relative inflation rates: Inflation ^Demand(^)Purchasing Power(^)
    relative income levels:Domestic Income^ Domestic Currency (^)
    gov’t intervention
    Generally Increases demand for goods
29
Q

Financial Factors that affect Exchange Rates

A
  • Relative interest rates:Interest^Demand^
    ease of capital flow
    In counties with high interest rates, ease of cash flow further increases demands

Generally increases demand of securities

30
Q

Interest Rate Parity Theory

A

Exchange rates will reach equilibrium when the forward premium/discount offsets the differences in interest rates

31
Q

Purchasing Power Parity Theory

A

Exchange rate differences are explained by differing interest rates
Long term exchanges rates are dictated by this theory

32
Q

International Fisher Effect Theory

A

Exchange rate differences are explained by real and nominal interest rates

33
Q

Exchange Rate Theories on High-Inflation Currencies

A

IRP - trade at high forward discounts
PPP & IFE - the currencies will weaken over time
IFE - the econmies will have high interest rates

CMA 2 (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions