TEST BANK FOR INTRODUCTION TO BUSINESS COMBINATIONS

TEST BANK FOR INTRODUCTION TO BUSINESS COMBINATIONS TEST BANK FOR INTRODUCTION TO BUSINESS COMBINATIONS SUMMARY OF ITEMS BY TOPIC TrueFalse Conceptual Multiple Choice Computational Multiple Choice Problems Short Answer Economic Motivation for Business Combinations -138 History of Business Combinations -142 Legal Restrictions on Business Combinations -149 Takeovers Control -151 Exchanges -153 Forms of Business Combinations Substance versus Form Contingent Consideration Taxes and Business Combinations 58-63 111-115 156-157 True-False Statements 1. Internal expansion often takes longer than external expansion. 2. Internal expansion is less risky than external expansion. 3. Internal expansion is often slow because the entity must build new production facilities to support new products or expanding sales. 4. The increase in the size of an entity resulting from a business combination would result in a lower cost of capital. 5. External combinations may result in economies of scale. 6. External expansion does not increase the total supply of products in the market place. 7. Internal expansion does not increase the total supply of products in the market place. 8. In a business combination, the investee takes control of the net assets of the investor. 9. All business combinations result in one entity taking control of the net assets of another entity. 10. An acquisition of net assets result in one entity taking control of the net assets of another entity while the acquisition of stock does not result in taking control of the net assets of another entity. 11. The capital budgeting techniques used to determine whether to acquire another entity are similar to the techniques used to evaluate purchases of equipment. 12. When two entities competing in the same industry combine, it is called a horizontal business combination. 13. Horizontal business combinations are likely to occur when management is attempting to dominate a geographic segment of the marke