WGU C201 Business Acumen Study Guide 100% accurate What are the two types of divestitures? - ANSWER A sell-off is a divestiture in which assets are sold to another company. In a spin-off, a new company is created from the assets divested. Shareholders of the divesting company become shareholders of the new company as well.
What is an LBO? - ANSWER a leveraged buyout is a transaction in which public shareholders are bought out, and the company reverts to private status. LBOs are usually finance with large amounts of borrowed money.
Define synergy. - ANSWER the term used to describe the benefits produced by a merger or acquisition. It is the notion that the combined company is worth more than the
buyer and the target are individually.
Shareholders of the divesting company become shareholders of the new company as a merger is a combination of two or more companies into one company. An acquisition is a transaction in which one
company buys another. Even in a merger, there is a buyer and a seller (called the target). - ANSWER The buyer offers cash,
securities, or a combination of the two in return for the target's shares. Mergers and acquisitions should be evaluated as
any large investment is: by comparing the costs with the benefit
Synergy is the term used to describe the benefits a
merger or acquisition is expected to produce. A leveraged buyout (LBO) is a transaction
in which shares are purchased
from public shareholders, and the company reverts to private status. Usually LBOs are financed with substantial amounts
of borrowed funds. Private equity companies are often major financers of LBOs. - ANSWER Divestitures are the opposite of mergers,
in which companies sell assets such as subsidiaries, product lines, or production facilities. A sell-off is a divestiture in
which assets are sold to another company. In a spin-off, a new company is created from
the assets divested.
Long-term funds are repaid over many years. There are three sources: long-term loans obtained from financial institutions, bonds sold to investors, and equity financing. Public sales of securities represent a major source of funds for corporations. These securities can generally be traded in secondary markets. Public sales can vary substantially from year to year depending on the conditions in the financial markets. - ANSWER Private placements are securities sold to a small number of
institutional investors. Most private placements involve debt securities. Venture capitalists are an important source of
financing for new companies. If the business succeeds, venture capitalists stand to earn
large profits
Private equity funds are investment companies that raise funds from wealthy individuals
and institutional investors and use the funds to make investments in both public and private companies. Unlike venture capitalists, private equity funds invest in all types of businesses. Sovereign wealth funds are investment companies owned by governments.
- ANSWER What is the most common type of security sold privately? Corporate debt securities are the most common
type of security sold privately.
Describe venture capitalists - ANSWER Venture capitalists raise money from wealthy individuals and institutional investors and invest the funds in promising companies. If the
business succeeds, venture capitalists can earn substantial profits.
What is a sovereign wealth fund? - ANSWER sovereign wealth fund is a government-
owned investment company. These companies make investments in a variety of financial and real assets, such as real estate. Although most
investments are based on the best risk-return trade-off, political, social, and strategic considerations play roles
as well.
The three major short-term funding options are trade credit, short-term loans from banks
and other financial institutions, and commercial paper. Trade credit is extended by suppliers when a company receives goods or services, agreeing to pay for them at a later date - ANSWER Trade credit is relatively easy to obtain and costs nothing unless a
supplier offers a cash discount. Loans from commercial banks are a significant source of short-term financing and are often used to finance accounts receivable and inventory.
Loans can be either unsecured or secured, with accounts receivable or inventory pledged as collateral
Commercial paper is a short-term IOU sold by a company. Although large amounts of money can be raised through the sale of commercial paper, usually at rates below those
charged by banks, access to the
commercial- the paper market is limited to large, financially strong corporations. - ANSWER What are the three sources of short-term funding? - ANSWER The three sources of short-term funding are trade credit,
short-term loans, and commercial paper.
What is an LBO? - ANSWER a leveraged buyout is a transaction in which public shareholders are bought out, and the company reverts to private status. LBOs are usually finance with large amounts of borrowed money.
Define synergy. - ANSWER the term used to describe the benefits produced by a merger or acquisition. It is the notion that the combined company is worth more than the
buyer and the target are individually.
Shareholders of the divesting company become shareholders of the new company as a merger is a combination of two or more companies into one company. An acquisition is a transaction in which one
company buys another. Even in a merger, there is a buyer and a seller (called the target). - ANSWER The buyer offers cash,
securities, or a combination of the two in return for the target's shares. Mergers and acquisitions should be evaluated as
any large investment is: by comparing the costs with the benefit
Synergy is the term used to describe the benefits a
merger or acquisition is expected to produce. A leveraged buyout (LBO) is a transaction
in which shares are purchased
from public shareholders, and the company reverts to private status. Usually LBOs are financed with substantial amounts
of borrowed funds. Private equity companies are often major financers of LBOs. - ANSWER Divestitures are the opposite of mergers,
in which companies sell assets such as subsidiaries, product lines, or production facilities. A sell-off is a divestiture in
which assets are sold to another company. In a spin-off, a new company is created from
the assets divested.
Long-term funds are repaid over many years. There are three sources: long-term loans obtained from financial institutions, bonds sold to investors, and equity financing. Public sales of securities represent a major source of funds for corporations. These securities can generally be traded in secondary markets. Public sales can vary substantially from year to year depending on the conditions in the financial markets. - ANSWER Private placements are securities sold to a small number of
institutional investors. Most private placements involve debt securities. Venture capitalists are an important source of
financing for new companies. If the business succeeds, venture capitalists stand to earn
large profits
Private equity funds are investment companies that raise funds from wealthy individuals
and institutional investors and use the funds to make investments in both public and private companies. Unlike venture capitalists, private equity funds invest in all types of businesses. Sovereign wealth funds are investment companies owned by governments.
- ANSWER What is the most common type of security sold privately? Corporate debt securities are the most common
type of security sold privately.
Describe venture capitalists - ANSWER Venture capitalists raise money from wealthy individuals and institutional investors and invest the funds in promising companies. If the
business succeeds, venture capitalists can earn substantial profits.
What is a sovereign wealth fund? - ANSWER sovereign wealth fund is a government-
owned investment company. These companies make investments in a variety of financial and real assets, such as real estate. Although most
investments are based on the best risk-return trade-off, political, social, and strategic considerations play roles
as well.
The three major short-term funding options are trade credit, short-term loans from banks
and other financial institutions, and commercial paper. Trade credit is extended by suppliers when a company receives goods or services, agreeing to pay for them at a later date - ANSWER Trade credit is relatively easy to obtain and costs nothing unless a
supplier offers a cash discount. Loans from commercial banks are a significant source of short-term financing and are often used to finance accounts receivable and inventory.
Loans can be either unsecured or secured, with accounts receivable or inventory pledged as collateral
Commercial paper is a short-term IOU sold by a company. Although large amounts of money can be raised through the sale of commercial paper, usually at rates below those
charged by banks, access to the
commercial- the paper market is limited to large, financially strong corporations. - ANSWER What are the three sources of short-term funding? - ANSWER The three sources of short-term funding are trade credit,
short-term loans, and commercial paper.
