WGU C201 Business Acumen Study Guide 100% accurate(GRADED A+)

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