1. …… is the process under which an existing large company purchases the business of another small
company doing similar business.
Correct : C. Absorption
2. Combination of two or more organisations in the same industry is called…..
Correct : A. Horizontal merge
3. ………is the combination of two or more organisation in a related industry but do not offer same
product.
Correct : C. Concentric
4. The acquisition of a firm in the same industry, but at a different stage of the production process is
called
Correct : C. Vertical
5. The positive incremental net gain associated with two firms enter into a merger is called ……
Correct : D. Synergy
6. If Microsoft were to acquire US Airways, the acquisition would be classified as a ,……..
Correct : A. Conglomerate
7. The distribution of shares in a subsidiary to existing parent company’s stockholder is called ……
Correct : B. Spin off
8. ……. is the ratio in which an acquiring company will offer its own shares in exchange for the target
company’s share during merger .
Correct : A. Swap ratio
9. …….. isa type of takeover in which the acquiring company turns itself into a subsidiary of the
purchased company.
Correct : C. Backflip
10. PAC stands for…..
Correct : A. Persons acting on concert
11. This strategy enables the existing shareholders of the target company to buy additional shares at a
high discount rate.
Correct : A. Flip- in
12. This plan gives veto rights over the controlof changes to managers.
Correct : A. Golden parachute
13. White knight relates to ……
Correct : B. Crown Jewel
14. Whichof the following is a pre offer take-over defences?
Correct : C. Poison pill
15. Which of the following is a post offer take- over defence?
Correct : C. White knight
16. The process by which company or organisation is divided and thereby becomes an independent
business is called …..
Correct : A. Spin out
17. The process of converting a subsidiary into an independent entity is called….
Correct : D. Spin off
18. LBO stands for….
Correct : B. Leveraged buy outs
19. …..isan acquisition in which management team of the company purchases assets and operation they
manage.
Correct : B. MBO
20. NOPAT stands for….
Correct : B. Net operating profit after tax
21. IGR stands for….
Correct : C. Internal growth rate
22. SGR stands for
Correct : A. Sustainable growth rate
23. Financial leverage indicates disproportionate change in taxable income as a result of change in……
Correct : A. Operating income
24. The term trading on equity is generally used for …. .…financial leverage
Correct : D. Favourable
25. MOS stands for ….
Correct : C. Margin of safety
26. The ideal situation is to have high financial leverage and low operating leverage.
Correct : B. True
27. Composite leverage explains change in taxable income on account of change in sales
Correct : A. True
28. Dividend on preference share capital is ignored while calculating operating leverage.
Correct : B. False
29. Trading on equity implies having a ------ debt-equity ratio.
Correct : C. High
30. ………. on capital is called cost of capital.
Correct : A. Minimum expected return
31. Which among the following method is based on time value of money?
Correct : C. Discounted cash flow method
32. Under net present value criteria, a project is approved if ……
Correct : A. NPV is positive
33. The return available from the project after the pay-back period is not considered in the case of ……
Correct : D. Pay-back period method
34. Internal rate of return and net present value are synonymous terms.
Correct : B. False
35. Ind AS deals with Lease finance is ____
Correct : D. Ind AS 115
36. ……..is a long term lease and the lessee will be paying much more than the cost of the property or
equipment to the lessor in the form of lease charges.
Correct : B. Financial lease
37. ………is also known as dividend capitalisation model
Correct : B. Gordon’s model
38. SVA stands for….
Correct : C. Shareholder value added
39. Financial risk arises when there is an involvement of ……in the capital structure
Correct : A. Debt
40. The concept of EVA has been developed by …….
Correct : C. Stern Steward
41. Use of more debt capital rather than equity capital is called……
Correct : D. Financial leverage
42. The policy on quantum of dividend to be distributed as dividend is termed as ……
Correct : C. Dividend policy
43. Operating leverage is not favourable when ………
Correct : A. Fixed costs are more than contribution
44. Stock dividend and bonus shares are synonymous terms.