AFM Corporate reconstruction and re-organisation

A management buyout is where:

• 1 A rival acquires the business
• 2 The company is split into two listed companies
• 3 The existing management team buys the business or a division from its owners
• 4 The company buys back shares

A demerger results in:

• 1 A cash payment to creditors only
• 2 The delisting of the business
• 3 A company splitting into separate companies, with shareholders holding shares in each
• 4 Two firms combining

The main source of funds in a buyout financed mainly by borrowing (an LBO) is:

• 1 Equity from the public
• 2 Retained earnings
• 3 Debt secured on the assets and cash flows of the target
• 4 Government grants

A company in financial distress offers its creditors new shares in exchange for debt. This is a:

• 1 Demerger
• 2 Debt for equity swap
• 3 Share buyback
• 4 Rights issue

A company sells part of its business to raise cash and focus on its core activities. This is a:

• 1 Merger
• 2 Share split
• 3 Divestment
• 4 A bonus issue of shares

An acquisition has been financed by new debt and the company's gearing rises sharply. Which risk has increased the most?

• 1 Political risk
• 2 Financial risk
• 3 Inflation risk
• 4 Business risk

A scheme of arrangement with creditors is generally approved when:

• 1 A majority in number and a high share by value of each class agree and the court sanctions it
• 2 Any single creditor agrees
• 3 The directors vote
• 4 The auditor consents