36. Which of the following are true when using Altmans Z score to predict the likelihood that a

firm will go bankrupt?

A. The higher the ratio of working capital to assets, the greater the probability of bankruptcy

B. The lower the ratio of retained earnings to assets, the lower the probability of bankruptcy

C. The higher the ratio of EBIT to assets, the greater the probability of bankruptcy

D. The higher the ratio of market value of equity to book value of total liabilities, the greater the

probability of bankruptcy

E. None of the above

37. Why do creditors usually accept a Chapter 11 reorganization instead of demanding a Chapter

7 liquidation?

A. Profits earned from liquidation are subject to alternative minimum tax

B. Creditors might collect more from a reorganized firm, in the long run, than a liquidated firm

C. The amount of debt forgiveness is not deductible for income tax purposes by the creditors

D. Debt cannot be written off GAAP-based income statements

E. None of the above

38. Hobgoblin Corp has four divisions: Consumer Products, Business Services, Data Storage,

and Security Services. These four divisions have sales revenue this year of $15 million, $27

million, $44 million, and $6 million, respectively. What is Hobgoblins Herfindahl Index?

A. 0.378

B. 0.346

C. 0.306

D. 0.286

E. None of the above

39. Which of the following is an example of a vertical merger?

A. McDonnell Douglas and Boeing in 1997

B. Compaq and Hewlett-Packard in 2002

C. Chesapeake Energy and Bronco Drilling in 2011

D. Chevron and Texaco in 2001

E. None of the above

40. Which of the following are true about takeovers?

A. Target stockholders tend to earn substantial gains

B. Acquirer stockholders tend to earn substantial gains

C. Bondholders of both acquirer and target tend to have positive gains

D. Both A and C

E. None of the above