Types of restructuring: investment, divestment, financing CFA Flashcards - Medical Study Cards
Master Types of restructuring: investment, divestment, financing with Oncourse flashcards. These spaced repetition flashcards are designed for medical students preparing for NEET PG, USMLE Step 1, USMLE Step 2, MBBS exams, and other medical licensing examinations.
Types of restructuring: investment, divestment, financing Flashcard Deck - 10 Cards
Flashcard 1: Premium paid in a takeover transaction =
Answer: premium = (deal price up - pre-announcement price) / pre-announcement price
Flashcard 2: Drivers of corporate transactions
Answer: - high security prices: cyclical
- greater CEO confidence
- lower cost of capital:
- overvalued stock
- industry shocks
Flashcard 3: Restructuring
Answer: - **cost restructuring:** typically follow periods of underperformance & drive efficiency
- outsourcing: (+) lower costs, (-) juggle contracts
- **Balance sheet restructuring**
- sale & leaseback: (+) cash infusion (lease payments>depreciation)
- dividend recapitalization: increase leverage by increasing debt financed dividends or by repurchasing shares
- objective: replaceme equity with cheaper debt
- **Reorganization:** may be mandated during involvency
Flashcard 4: What is a dividend recap?
Answer: BS restructuring that increases leverage by using borrowed funds to repurchase company stock
Flashcard 5: How is the market conversion price affected by a reverse stock split?
Answer: doubles
Flashcard 6: How could a company counter declining growth rates?
Answer: - acquire faster-growing businesses
- divest segment with lowest growth
Flashcard 7: How is a conversion ratio affected by a stock split?
Answer: doubles
Flashcard 8: How is the conversion ratio affected by a reverse stock split?
Answer: reduces by half
Flashcard 9: Cannibalization rate =
Answer: \= new product sales that will replace existing product sales / total sales of existing product
Flashcard 10: If the deal is expected to fall through in merger arbitage....
Answer: short target company and long acquiring company
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