Which of the following are common sources of financing for LBOs A Asset based lending B Cash flow based lending C Junk bonds D All of the above A typical good candidate for LBO will have unused borrowing capacity, ,predictable positive operating cash flow, and assets that are not critical to the continuing operation of the business A Intellectual property rights B Cash reserves C Goodwill D Tangible assets Tax considerations rarely affect the amount and composition of the purchase price True False Match the following different forms of payment with their disadvantages A B C D E F G H Cash A B C D E F G H Stock A B C D E F G H Debt A B C D E F G H Purchase price adjustments A B C D E F G H Rights to Intellectual Property A B C D E F G H Real property A May limit the integration of the businesses B Must rely solely on protections afforded in the contract to recover claims C Opportunity Cost D Increases the uncertainty of the sales price E Illiquid, income taxed at ordinary rates F Adds complexity and increases leverage G Audit expense H Adds complexity,potential EPS dilution About 80 of M As require some purchase price adjustment, resulting in most often from a restatement of operating earnings or cash flow or working capital What is the best way to hold back A Cash B Stocks C Earnout D Voting rights What is one of the disadvantages of the cash purchases of stock A Loses NOL (net operating loss) and tax credits B Responsible for known and unknown liabilities C May postpone the realization of synergies D Favorable tax treatment is lost if the buyer and seller adopt 338election Pro forma financial statements are frequently used to show what the acquirer and target's combined financial statements would look like if they were merged True False As a general rule, a transaction is tax free to the target's shareholders if A The buyer uses cash to acquire the target's stock B The buyer uses mostly stock to acquire substantially all of the target's stock or assets C The buyer uses cash to buy the target's assets D The buyer uses debt to buy the target's stock

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Which of the following are common sources of financing for LBOs? A. Asset based lending B. Cash flow based lending C. Junk bonds D. All

Which of the following are common sources of financing for LBOs?

	A.	Asset based lending
	B.	Cash flow based lending
	C.	Junk bonds
	D.	All of the above

A typical good candidate for LBO will have unused borrowing capacity,_________,predictable positive operating cash flow, and assets that are not critical to the continuing operation of the business.

	A.	Intellectual property rights
	B.	Cash reserves
	C.	Goodwill
	D.	Tangible assets

Tax considerations rarely affect the amount and composition of the purchase price.

True

False

Match the following different forms of payment with their disadvantages:

- A. B. C. D. E. F. G. H.	Cash
- A. B. C. D. E. F. G. H.	Stock
- A. B. C. D. E. F. G. H.	Debt
- A. B. C. D. E. F. G. H.	Purchase price adjustments
- A. B. C. D. E. F. G. H.	Rights to Intellectual Property
- A. B. C. D. E. F. G. H.	Real property

A.	May limit the integration of the businesses
B.	Must rely solely on protections afforded in the contract to recover claims
C.	Opportunity Cost
D.	Increases the uncertainty of the sales price
E.	Illiquid, income taxed at ordinary rates
F.	Adds complexity and increases leverage
G.	Audit expense
H.	Adds complexity,potential EPS dilution

About 80% of M&As require some purchase price adjustment, resulting in most often from a restatement of operating earnings or cash flow or working capital. What is the best way to hold back?

	A.	Cash
	B.	Stocks
	C.	Earnout
	D.	Voting rights

What is one of the disadvantages of the cash purchases of stock?

	A.	Loses NOL (net operating loss) and tax credits
	B.	Responsible for known and unknown liabilities
	C.	May postpone the realization of synergies
	D.	Favorable tax treatment is lost if the buyer and seller adopt 338election

Pro forma financial statements are frequently used to show what the acquirer and target's combined financial statements would look like if they were merged.

True

False

As a general rule, a transaction is tax-free to the target's shareholders if

	A.	The buyer uses cash to acquire the target's stock
	B.	The buyer uses mostly stock to acquire substantially all of the target's stock or assets
	C.	The buyer uses cash to buy the target's assets
	D.	The buyer uses debt to buy the target's stock