Reading 35: Mergers and Acquisitions - LOS q ～ Q1-3 class, concerned, because, assets

cfaedu

1.sofar as reasons for divestitures are concerned, when a firm divests of assets because of reverse synergies, this is most consistent with the rationale of:

A)   assets no longer fitting the long-term strategy.

B)   a lack of profitability.

C)   individual parts being worth more than the whole.

D)   a desire to raise cash.

2.sofar as reasons for divestitures are concerned, when a firm divests of assets because of rising costs or a change in consumer tastes, this is most consistent with the rationale of:

A)   assets no longer fitting the long-term strategy.

B)   individual parts are worth more than the whole.

C)   desire to raise cash.

D)   a lack of profitability.

3.sofar as reasons for divestitures are concerned, when a firm divests of assets because of a desire to focus on its core business, this is most consistent with the rationale of:

A)   a lack of profitability.

B)   assets no longer fitting the long-term strategy.

C)   individual parts being worth more than the whole.

D)   a desire to raise cash.

cfaedu

答案和详解如下：

1.sofar as reasons for divestitures are concerned, when a firm divests of assets because of reverse synergies, this is most consistent with the rationale of:

A)   assets no longer fitting the long-term strategy.

B)   a lack of profitability.

C)   individual parts being worth more than the whole.

D)   a desire to raise cash.

The correct answer was C)

Whereas synergies imply that the whole is worth more than the sum of the parts, reverse synergies imply that the whole is worth less than the sum of the parts. Therefore, the firm is better off selling the parts to which this applies because they are worth more separately than they are as a part of the firm.

2.sofar as reasons for divestitures are concerned, when a firm divests of assets because of rising costs or a change in consumer tastes, this is most consistent with the rationale of:

A)   assets no longer fitting the long-term strategy.

B)   individual parts are worth more than the whole.

C)   desire to raise cash.

D)   a lack of profitability.

The correct answer was D)

Changes in consumer tastes imply that sales are below expectations, while rising costs are self-explanatory. In either case, this seems to indicate that profitability objectives are not being met.

3.sofar as reasons for divestitures are concerned, when a firm divests of assets because of a desire to focus on its core business, this is most consistent with the rationale of:

A)   a lack of profitability.

B)   assets no longer fitting the long-term strategy.

C)   individual parts being worth more than the whole.

D)   a desire to raise cash.

The correct answer was B)

A stated desire to focus on the firm’s core business indicates that the assets being sold are not a part of the core business. Thus, the assets no longer fit the long-term strategy.