Corporate Reorganization

### Which of the following best describes a corporate merger? - [x] The combination of two companies into a single entity. - [ ] The separation of a company into two independent entities. - [ ] The transfer of assets from one company to another without forming a new entity. - [ ] The acquisition of a minority stake in another company. > **Explanation:** A merger is the combination of two companies to form a single entity, pooling resources and operations. ### In an acquisition, which company assumes control? - [ ] The smaller company - [ ] Neither company assumes control - [x] The acquiring company - [ ] The government regulatory body > **Explanation:** In an acquisition, the acquiring company assumes control over the acquired company’s assets and operations. ### What happens in a divisive acquisition? - [ ] Two companies merge to form a new third company. - [ ] A company is dissolved and its assets liquidated. - [x] A company separates certain assets to form a new independent company. - [ ] One company takes over all assets of another without forming a new company. > **Explanation:** A divisive acquisition involves separating certain assets to create a new, independent company, typically to streamline operations or focus on core activities. ### What type of corporate reorganization involves creation of a new company from a business unit of an existing company? - [ ] Merger - [ ] Acquisition - [x] Spin-off - [ ] Consolidation > **Explanation:** A spin-off creates a new company from a business unit or segment of an existing corporation, making the new entity independent. ### Which of the following is a primary objective of corporate reorganization? - [x] Improving operational efficiency - [ ] Increasing market value irrespective of other factors - [ ] Avoiding compliance with regulatory requirements - [ ] Reducing employee headcount as the sole purpose > **Explanation:** Corporate reorganization primarily aims to improve operational efficiency, among other strategic objectives. ### How often should companies engage in corporate reorganization? - [ ] Annually - [ ] Every five years - [ ] Monthly - [x] As needed based on strategic goals > **Explanation:** Companies should engage in corporate reorganization as needed, aligned with their strategic goals and market conditions. ### What is the difference between a merger and a consolidation? - [x] A merger combines two companies into one, whereas a consolidation creates a new company from the merging entities. - [ ] A merger involves asset transfers without changing company structure. - [ ] A consolidation splits a company into multiple parts. - [ ] There is no difference; they are synonymous terms. > **Explanation:** A merger combines two companies into one single existing entity, while consolidation creates a new company from the merging entities. ### Which term refers to assuming control of a company often through purchasing a majority stake? - [ ] Spin-off - [ ] Merger - [ ] Divestiture - [x] Takeover > **Explanation:** A takeover refers to assuming control of a company, typically achieved by purchasing a majority stake. ### Why might a company undertake a spin-off? - [x] To focus on its core business activities - [ ] To increase its employee count - [ ] To merge with another company - [ ] To take over another company > **Explanation:** Companies undertake spin-offs to streamline operations and focus on their core business activities, making the spun-off unit independent. ### Which regulatory body in the United States oversees corporate reorganizations? - [ ] Department of Commerce - [ ] Federal Trade Commission (FTC) - [ ] The International Monetary Fund (IMF) - [x] The Securities and Exchange Commission (SEC) > **Explanation:** The Securities and Exchange Commission (SEC) oversees corporate reorganizations in the United States, ensuring compliance with relevant laws and regulations.