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1) Which of the following statements is correct? Financial buyers are operating partners that try to create synergies

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1) Which of the following statements is correct?

Financial buyers are operating partners that try to create synergies.

Strategic buyers are institutions that provide capital and are not operators.

Financial buyers are institutions that provide capital and are not operators.

Strategic buyers are asset managers that are trying to time the purchase or sale of a business.

 

2. Which of the following is the correct ordering of the capital stack (from most secure to least secure)?

Subordinated debt -> Senior debt -> Equity

Senior debt -> Subordinated debt-> Equity

Senior debt -> Equity -> Subordinated debt

Equity -> Subordinated debt -> Senior debt

 

3. Which of the following debt repayment profiles involves a growing principal amount over time?

Equity

Pay in kind debt

Mezzanine finance

Senior Debt

 

4. Which of the following statements about capital structure are correct? Select ALL correct answers.

Having too little debt may increase the risk of default in repayment.

Having too much equity may dilute earnings and the value of the original investors.

A company should always finance its business using as much debt as possible in order to optimize the capital structure.

A company needs to consider the current economic climate when making decisions on debt and equity proportion

 

5. Which of the following is NOT a form of subordinated debt?

Revolver

High yield bonds

Payment-In-Kind Notes

Vendor Notes

 

6. Which of the following best describes a leveraged buyout fund’s acquisitions?

Investing in mid-sized businesses

Investing in early stage businesses

Investing in foreign businesses

Investing in mature businesses

 

7. Which of the following is not a function of public accounting firms?

Audit

Due dilligence

Financial Planning & Analysis

Transaction Advisory

 

8. Which of the following M&A transaction equations is correct?

Value created = Stand-alone value + Net synergies – Consideration (price paid)

Value created = Stand-alone value + Net synergies – Transaction costs

Value created = Hard synergies + Soft synergies – Transaction costs

Value created = Consideration (price paid) + Net synergies – Transaction costs

 

9. What should a company do if it wants to reduce the number of shares outstanding?

Issue more debt

Pay cash dividends

Invest in more projects

Repurchase shares