see these i stink at. i’ll go C.
too difficlut - My guess would be C?
C
def going to be diff stages- bootstrapping takes a high P/E firm buying a low one… but i horizontal is same business, conglomerate is all types of businesses… which one more likely to bootstrap? who knows.
yep earnings dont change but total shares outstanding are lower than the 2 seperate entities.
bannisja Wrote: ------------------------------------------------------- > def going to be diff stages- bootstrapping takes a > high P/E firm buying a low one… but i horizontal > is same business, conglomerate is all types of > businesses… which one more likely to bootstrap? > who knows. i too remembered that. then i thought if a conglomerate or horizontal would be more likelty to bootstrap. if the move is horizontal, the motivation for the merger could be considered to expand markets or something other than the boot strap. i figured the conglomerate was a better guess and i luckily got this one. The correct answer was A. In order for EPS bootstrapping to occur, the target must have a lower price-to-earnings (P/E) ratio than the acquirer. Since firms in the same industry are more likely to have similar P/Es, this makes a horizontal merger less likely. The differential in P/Es implies a differing level of expected growth. All else being equal, this suggests that the firms will be in different lifecycle stages. follow up… When bootstrapping, the acquiring firm purchases: A) high growth firms with high price-to-earnings (P/E) ratios. B) high growth firms with low price-to-earnings (P/E) ratios. C) slow growth firms with low price-to-earnings (P/E) ratios. Corporate governance systems are primarily concerned with potential principal-agent problems between: A) managers and directors. B) directors and shareholders. C) managers and creditors. ________________________________________
B) high growth firms with low price-to-earnings (P/E) ratios. B) directors and shareholders
cfaboston28 Wrote: ------------------------------------------------------- > swap u r having a roll here. I got 2 wrong but u > got none. Just nuked 1 and many to come.
When bootstrapping, the acquiring firm purchases: B) high growth firms with low price-to-earnings (P/E) ratios. Corporate governance systems are primarily concerned with potential principal-agent problems between: B) directors and shareholders.
C B
whoa… isn’t it C then B? acquiring firm buys a low P/E firm, no? i need to have me a SS9 night.
The correct answer was C. Bootstrapping involves a high growth, high P/E ratio firm purchasing slow growth firms with low P/E ratios. The low P/E implies that the acquiring firm can purchase the firm “cheap” since its stock exhibits a higher price for a given level of earnings. The end result is that the earnings of the two firms are added together, while the exchange of high P/E company’s shares are made at a less than 1 to 1 ratio for the low P/E company shares. Thus, earnings per share will increase due to the lower total number of shares outstanding. The correct answer was B. Corporate governance systems attempt to minimize or eliminate any potential agent problems that may arise between two groups: (1) directors and shareholders and (2) managers and shareholders. Boston the lone survivor on that one… Which of the following statements about operating income and operating cash flow is most accurate? A) Operating income is confirmed by operating cash flow when the growth rates of the two measures are relatively stable over time. B) Operating income is more reliable than operating cash flow because of the judgments and estimates involved with accrual accounting. C) Operating cash flow usually increases faster than operating income when the firm is growing.
A
> Boston the lone survivor on that one… Boston - I cant get the intuition correct for acquiring a ‘slow growth firm’ rather than a ‘high growth firm’.
Banni was with me in calling C A
swaptiongamma Wrote: ------------------------------------------------------- > > Boston the lone survivor on that one… > > Boston - I cant get the intuition correct for > acquiring a ‘slow growth firm’ rather than a ‘high > growth firm’. The idea behind that is to increase your PE by acquiring decline phase firm which has slow growth.
a is correct on the one before Schweser explains it as being a Slow Groth “Prospects” firm. go figure. Which of the following statements about stock-based compensation are correct or incorrect? Statement #1: The grant date of a service-based award is the date when the employees’ benefits are fully vested. Statement #2: When two or more performance conditions must be satisfied, the requisite service period ends when the first condition is met. A) Only one is correct. B) Both are correct. C) Both are incorrect.
(this thread is) 3 pages in 90 min on a Thursday afternoon and for something related to CFAI material and not joking around or innuendos? FML. That means this exam is coming soon.
C both are incorrect What was the answer of operating cash flow.
C) Both are incorrect?