WPC 480 Chapter 7 UPDATED ACTUAL
Questions and CORRECT Answers
merger - CORRECT ANSWER -is a strategy through which two firms
agree to integrate their operations on a relatively
coequal basis
acquisition - CORRECT ANSWER -is a strategy through which one
firm buys a controlling, or 100 percent, interest
in another firm with the intent of making the
acquired firm a subsidiary business within its
portfolio.
Restructuring - CORRECT ANSWER -is a strategy through which a
firm changes its set of businesses or its financial
structure.
takeover - CORRECT ANSWER -Is a special type of acquisition
where the target firm does not solicit the
acquiring firm's bid; thus, takeovers are
unfriendly acquisitions.
The need to create _____ for stakeholders is a primary influence on a firm's decisions to engage
in merger and acquisition activity. - CORRECT ANSWER -value
An influence that impacts a firm's decision to pursue a merger or acquisition is increased
confidence in its: - CORRECT ANSWER -domestic economy.
, Disney bought Pixar in 2004 to extend and begin a new partnership in its renewed focus on
animation. In the deal, Steve Jobs, the CEO of Pixar at the time, vowed to preserve the
independent nature of Pixar. Since then, the two have put out hits such as Wall-E and Up. This
partnership is an example of a(n): - CORRECT ANSWER -merger.
Which of the following statements best explains how shareholders are affected by acquisitions? -
CORRECT ANSWER -Acquired firms' shareholders often earn above-average returns as
a result of acquisitions, whereas acquiring firms' shareholders often earn returns that are close to
zero as a result of acquisitions.
When a firm buys a competitor, supplier, distributor, or business in a highly-related industry so a
core competency can be used to gain competitive advantage, this demonstrates an acquisition
strategy to gain: - CORRECT ANSWER -increased market power.
When a firm acquires another firm competing in the same industry, market power is increased by
exploiting cost and revenue-based synergies. This type of acquisition is called: - CORRECT
ANSWER -horizontal acquisition.
A popular juniors clothing store features young designers and has been very successful. To gain
strategic competitiveness, the clothing store frequently acquires young social-media sensations'
designs and brings their designs to life in the store. What type of acquisition is the store using to
increase its strategic competitiveness? - CORRECT ANSWER -Related acquisition
Two specialty craft stores have just been bought by craft giant Ultimate Crafts. By rebranding the
small stores, Ultimate Crafts' executives hope to gain strategic competitiveness in what way? -
CORRECT ANSWER -Market power
Which of the following is an example of a problem that can prevent an acquisition from being
successful? - CORRECT ANSWER -Too much diversification
What does it mean when an acquisition is unable to achieve synergy? - CORRECT
ANSWER -When the acquiring firm and acquired firm do not effectively share resources,
economies of scale, and economies of scope across the businesses
Questions and CORRECT Answers
merger - CORRECT ANSWER -is a strategy through which two firms
agree to integrate their operations on a relatively
coequal basis
acquisition - CORRECT ANSWER -is a strategy through which one
firm buys a controlling, or 100 percent, interest
in another firm with the intent of making the
acquired firm a subsidiary business within its
portfolio.
Restructuring - CORRECT ANSWER -is a strategy through which a
firm changes its set of businesses or its financial
structure.
takeover - CORRECT ANSWER -Is a special type of acquisition
where the target firm does not solicit the
acquiring firm's bid; thus, takeovers are
unfriendly acquisitions.
The need to create _____ for stakeholders is a primary influence on a firm's decisions to engage
in merger and acquisition activity. - CORRECT ANSWER -value
An influence that impacts a firm's decision to pursue a merger or acquisition is increased
confidence in its: - CORRECT ANSWER -domestic economy.
, Disney bought Pixar in 2004 to extend and begin a new partnership in its renewed focus on
animation. In the deal, Steve Jobs, the CEO of Pixar at the time, vowed to preserve the
independent nature of Pixar. Since then, the two have put out hits such as Wall-E and Up. This
partnership is an example of a(n): - CORRECT ANSWER -merger.
Which of the following statements best explains how shareholders are affected by acquisitions? -
CORRECT ANSWER -Acquired firms' shareholders often earn above-average returns as
a result of acquisitions, whereas acquiring firms' shareholders often earn returns that are close to
zero as a result of acquisitions.
When a firm buys a competitor, supplier, distributor, or business in a highly-related industry so a
core competency can be used to gain competitive advantage, this demonstrates an acquisition
strategy to gain: - CORRECT ANSWER -increased market power.
When a firm acquires another firm competing in the same industry, market power is increased by
exploiting cost and revenue-based synergies. This type of acquisition is called: - CORRECT
ANSWER -horizontal acquisition.
A popular juniors clothing store features young designers and has been very successful. To gain
strategic competitiveness, the clothing store frequently acquires young social-media sensations'
designs and brings their designs to life in the store. What type of acquisition is the store using to
increase its strategic competitiveness? - CORRECT ANSWER -Related acquisition
Two specialty craft stores have just been bought by craft giant Ultimate Crafts. By rebranding the
small stores, Ultimate Crafts' executives hope to gain strategic competitiveness in what way? -
CORRECT ANSWER -Market power
Which of the following is an example of a problem that can prevent an acquisition from being
successful? - CORRECT ANSWER -Too much diversification
What does it mean when an acquisition is unable to achieve synergy? - CORRECT
ANSWER -When the acquiring firm and acquired firm do not effectively share resources,
economies of scale, and economies of scope across the businesses
