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Updated on: 15 Jul 2025, 12:31
Originally posted by daagh on 12 Oct 2013, 10:50.
Last edited by Sajjad1994 on 15 Jul 2025, 12:31, edited 9 times in total.
Last edited by Sajjad1994 on 15 Jul 2025, 12:31, edited 9 times in total.
Question 1
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
15%
(low)
Question Stats:
77% (02:47) correct
23%
(02:51) wrong
based on 5938
sessions
History
Date
Time
Result
Not Attempted Yet
Question 2
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
35%
(medium)
Question Stats:
65% (01:23) correct 35%
(01:24) wrong
based on 6099
sessions
History
Date
Time
Result
Not Attempted Yet
Question 3
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
45%
(medium)
Question Stats:
58% (01:20) correct 42%
(01:29) wrong
based on 6021
sessions
History
Date
Time
Result
Not Attempted Yet
Question 4
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
65%
(hard)
Question Stats:
49% (01:32) correct 51%
(01:39) wrong
based on 5710
sessions
History
Date
Time
Result
Not Attempted Yet
Question 5
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
25%
(medium)
Question Stats:
65% (01:09) correct 35%
(01:17) wrong
based on 5512
sessions
History
Date
Time
Result
Not Attempted Yet
Question 6
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
5%
(low)
Question Stats:
81% (01:06) correct 19%
(01:14) wrong
based on 5285
sessions
History
Date
Time
Result
Not Attempted Yet
Question 7
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
45%
(medium)
Question Stats:
60% (01:12) correct 40%
(01:10) wrong
based on 5251
sessions
History
Date
Time
Result
Not Attempted Yet
Findings from several studies on corporate mergers and acquisitions during the 1970s and 1980s raise questions about why firms initiate and consummate such transactions. One study showed, for example, that acquiring firms were on average unable to maintain acquired firms’ pre-merger levels of profitability. A second study concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms. A third demonstrated that, following the announcement of a prospective merger, the stock of the prospective acquiring firm tends to increase in value much less than does that of the firm for which it bids. Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones.
Acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests. It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive compensation of executives, lack of monitoring by boards of directors, and managerial error in estimating the value of firms targeted for acquisition. Alternatively, the acquisition acts of bidders may derive from modeling: a manager does what other managers do.
Acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests. It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive compensation of executives, lack of monitoring by boards of directors, and managerial error in estimating the value of firms targeted for acquisition. Alternatively, the acquisition acts of bidders may derive from modeling: a manager does what other managers do.
Questions 64–70 refer to the passage above.
64. The primary purpose of the passage is to
(A) review research demonstrating the benefits of corporate mergers and acquisitions and examine some of the drawbacks that acquisition behavior entails
(B) contrast the effects of corporate mergers and acquisitions on acquiring firms and on firms that are acquired
(C) report findings that raise questions about a reason for corporate mergers and acquisitions and suggest possible alternative reasons
(D) explain changes in attitude on the part of acquiring firms toward corporate mergers and acquisitions
(E) account for a recent decline in the rate of corporate mergers and acquisitions
(A) review research demonstrating the benefits of corporate mergers and acquisitions and examine some of the drawbacks that acquisition behavior entails
(B) contrast the effects of corporate mergers and acquisitions on acquiring firms and on firms that are acquired
(C) report findings that raise questions about a reason for corporate mergers and acquisitions and suggest possible alternative reasons
(D) explain changes in attitude on the part of acquiring firms toward corporate mergers and acquisitions
(E) account for a recent decline in the rate of corporate mergers and acquisitions
65. The findings cited in the passage suggest which of the following about the outcomes of corporate mergers and acquisitions with respect to acquiring firms?
(A) They include a decrease in value of many acquiring firms’ stocks.
(B) They tend to be more beneficial for small firms than for large firms.
(C) They do not fulfill the professed goals of most acquiring firms.
(D) They tend to be beneficial to such firms in the long term even though apparently detrimental in the short term.
(E) They discourage many such firms from attempting to make subsequent bids and acquisitions.
66. It can be inferred from the passage that the author would be most likely to agree with which of the following statements about corporate acquisitions?
(A) Their known benefits to national economies explain their appeal to individual firms during the 1970s and 1980s.
(B) Despite their adverse impact on some firms,they are the best way to channel resources from less to more productive sectors of a nation’s economy.
(C) They are as likely to occur because of poor monitoring by boards of directors as to be caused by incentive compensation for managers.
(D) They will be less prevalent in the future, since their actual effects will gain wider recognition.
(E) Factors other than economic benefit to the acquiring fi rm help to explain the frequency with which they occur.
(A) Their known benefits to national economies explain their appeal to individual firms during the 1970s and 1980s.
(B) Despite their adverse impact on some firms,they are the best way to channel resources from less to more productive sectors of a nation’s economy.
(C) They are as likely to occur because of poor monitoring by boards of directors as to be caused by incentive compensation for managers.
(D) They will be less prevalent in the future, since their actual effects will gain wider recognition.
(E) Factors other than economic benefit to the acquiring fi rm help to explain the frequency with which they occur.
67. The author of the passage mentions the effect of acquisitions on national economies most probably in order to
(A) provide an explanation for the mergers and acquisitions of the 1970s and 1980s overlooked by the findings discussed in the passage
(B) suggest that national economic interests played an important role in the mergers and acquisitions of the 1970s and 1980s
(C) support a noneconomic explanation for the mergers and acquisitions of the 1970s and 1980s that was cited earlier in the passage
(D) cite and point out the inadequacy of one possible explanation for the prevalence of mergers and acquisitions during the 1970s and 1980s
(E) explain how modeling affected the decisions made by managers involved in mergers and acquisitions during the 1970s and 1980s
(A) provide an explanation for the mergers and acquisitions of the 1970s and 1980s overlooked by the findings discussed in the passage
(B) suggest that national economic interests played an important role in the mergers and acquisitions of the 1970s and 1980s
(C) support a noneconomic explanation for the mergers and acquisitions of the 1970s and 1980s that was cited earlier in the passage
(D) cite and point out the inadequacy of one possible explanation for the prevalence of mergers and acquisitions during the 1970s and 1980s
(E) explain how modeling affected the decisions made by managers involved in mergers and acquisitions during the 1970s and 1980s
68. According to the passage, during the 1970s and 1980s bidding firms differed from the firms for which they bid in that bidding firms
(A) tended to be more profi table before a merger than after a merger
(B) were more often concerned about the impact of acquisitions on national economies
(C) were run by managers whose actions were modeled on those of other managers
(D) anticipated greater economic advantages from prospective mergers
(E) experienced less of an increase in stock value when a prospective merger was announced
(A) tended to be more profi table before a merger than after a merger
(B) were more often concerned about the impact of acquisitions on national economies
(C) were run by managers whose actions were modeled on those of other managers
(D) anticipated greater economic advantages from prospective mergers
(E) experienced less of an increase in stock value when a prospective merger was announced
69. According to the passage, which of the following was true of corporate acquisitions that occurred during the 1970s and 1980s?
(A) Few of the acquisitions that f rms made were subsequently divested.
(B) Most such acquisitions produced only small increases in acquired firms’ levels of profitability.
(C) Most such acquisitions were based on an overestimation of the value of target firms.
(D) The gains realized by most acquiring firms did not equal the amounts expended in acquiring target firms.
(E) About half of such acquisitions led to long-term increases in the value of acquiring firms’ stocks.
(A) Few of the acquisitions that f rms made were subsequently divested.
(B) Most such acquisitions produced only small increases in acquired firms’ levels of profitability.
(C) Most such acquisitions were based on an overestimation of the value of target firms.
(D) The gains realized by most acquiring firms did not equal the amounts expended in acquiring target firms.
(E) About half of such acquisitions led to long-term increases in the value of acquiring firms’ stocks.
70. The author of the passage implies that which of the following is a possible partial explanation for acquisition behavior during the 1970s and 1980s?
(A) Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were.
(B) Managers miscalculated the value of firms that were to be acquired.
(C) Lack of consensus within boards of directors resulted in their imposing conflicting goals on managers.
(D) Total compensation packages for managers increased during that period.
(E) The value of bidding firms’ stock increased significantly when prospective mergers were announced.
(A) Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were.
(B) Managers miscalculated the value of firms that were to be acquired.
(C) Lack of consensus within boards of directors resulted in their imposing conflicting goals on managers.
(D) Total compensation packages for managers increased during that period.
(E) The value of bidding firms’ stock increased significantly when prospective mergers were announced.
Posts: 12
Question 67:
D would be the correct answer choice here. First, locate the sentence you need to read to answer this question. The impact on national economies is mentioned in the first line of the second paragraph, so we need go no farther then here to find the answer. What does this sentence say about the effect on national companies? That although there may be a positive effect, this is not why such deals were arranged. This implies that some people have considered the positive effect on national economies to be an explanation of all those mergers and acquisitions. Now, notice the bare logical structure of this sentence: X may well be..., but....Y. In other words, Although X, Y. What is X - Acquisitions' impact on national economies. What is Y? The company or personal interest of executives. So what this sentence telling us? That X is not an adequate explanation of mergers and acquisitions, but Y is. This is precisely what answer choice D is telling us: cite and point out the inadequacy of one possible explanation, etc.
D would be the correct answer choice here. First, locate the sentence you need to read to answer this question. The impact on national economies is mentioned in the first line of the second paragraph, so we need go no farther then here to find the answer. What does this sentence say about the effect on national companies? That although there may be a positive effect, this is not why such deals were arranged. This implies that some people have considered the positive effect on national economies to be an explanation of all those mergers and acquisitions. Now, notice the bare logical structure of this sentence: X may well be..., but....Y. In other words, Although X, Y. What is X - Acquisitions' impact on national economies. What is Y? The company or personal interest of executives. So what this sentence telling us? That X is not an adequate explanation of mergers and acquisitions, but Y is. This is precisely what answer choice D is telling us: cite and point out the inadequacy of one possible explanation, etc.
BinhFantasia
"Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones." - The bidders (i.e. the acquiring firms) assert (or profess) that the deals will benefit their firms economically.
But the "second study concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms." If the premiums paid exceed the post-acquisition gains, then the firm would have lost money on the deal. Obviously this would not benefit the firm economically.
The bidders profess that they are doing the deals for economic reasons, but the study suggests that most bidding firms lose money on the deals. Thus, the outcomes of the deals do not fulfill the professed goals (economic gains) of the acquiring firms.
I hope that helps!
_________________
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Quote:
Quote:
Even though the deals might have benefits to national economies, the author thinks the deals must be explained by benefits to the executives or their companies, not by benefits to the nation's economy: "the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests". Eliminate (A).
Quote:
The passage states that the "acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy" but does not claim that corporate acquisitions are the BEST way to channel resources. Eliminate (B).
Quote:
The passage mentions incentive compensation for EXECUTIVES as a possible explanation for the acquisitions but not incentive compensation for MANAGERS. Furthermore, the author does not discuss the relative significance the possible factors. In other words, the author does not say whether some factors are more or less common than others. Eliminate (C).
Quote:
This idea is not mentioned in the passage, so eliminate (D).
Quote:
The factors cited in the final two sentences are possible explanations for the acquisitions. None of these describe situations that would benefit the firm, so choice (E) is the best answer.
I hope that helps!
_________________
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General Discussion
Can anyone explain Q66
I am not getting how to infer the bold part in option E
Factors other than economic benefit to the acquiring firm help to explain the frequency with which they occur
I am not getting how to infer the bold part in option E
Factors other than economic benefit to the acquiring firm help to explain the frequency with which they occur
dream21
Hey there,
If you look at the last line of para 1 it says "Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones" where "common" more or less means "frequent".
Hope this helps!
Hello everyone ....
I have a doubt in question 70, its pretty simple but my concern is the question's phrasing . The questions says" The author of the passage implies..... ?"
Now as far as I know if we have a imply question the answer to that question will not be explicitly mentioned in the passage and that is not case here. Answer choice B is clearly stated.Its like restating the given.
So is my thumb rule for imply questions incorrect ?? or this a strange case.
Please help out !!
Thanks and kudos for solutions !
I have a doubt in question 70, its pretty simple but my concern is the question's phrasing . The questions says" The author of the passage implies..... ?"
Now as far as I know if we have a imply question the answer to that question will not be explicitly mentioned in the passage and that is not case here. Answer choice B is clearly stated.Its like restating the given.
So is my thumb rule for imply questions incorrect ?? or this a strange case.
Please help out !!
Thanks and kudos for solutions !
AryamaDuttaSaikia
Jamboree GMAT Instructor
Joined: 15 Jul 2015
Last visit: 06 Dec 2019
Posts: 250
Status:GMAT Expert
Affiliations: Jamboree Education Pvt Ltd
Location: India
Posts: 250
Hi Anurag,
The word IMPLIES (in this question) - is towards the word "Partial Explanation" as the answer choice B (explicitly mentioned in the passage) is only one of the three factors mentioned in the second paragraph.
Since, the choice only referes to one factor that is why "implies that ..possible partial explanation".
Hope it helps!
_________________
The word IMPLIES (in this question) - is towards the word "Partial Explanation" as the answer choice B (explicitly mentioned in the passage) is only one of the three factors mentioned in the second paragraph.
Since, the choice only referes to one factor that is why "implies that ..possible partial explanation".
Hope it helps!
_________________
Aryama Dutta Saikia
Jamboree Education Pvt. Ltd.
Jamboree Education Pvt. Ltd.
Posts: 1
Can anyone explain question 68 for me? I don't really get it:(
Posted from my mobile device
Posted from my mobile device
kyoshi441994
68. According to the passage, during the 1970s and 1980s bidding firms differed from the firms for which they bid in that bidding firms----
In the first paragraph , three study findings are mentioned highlighting the impact of M&A on acquired and acquiring firms .
we need to go back and look for details mentioned about "bidding firm" that is "acquiring firm"-
(A) tended to be more profitable before a merger than after a merger
- not mentioned
(B) were more often concerned about the impact of acquisitions on national economies
- point taken from 2nd paragraph first line . it is generic , not mentioning that bidding firms had this view
(C) were run by managers whose actions were modeled on those of other managers
-not mentioned
(D) anticipated greater economic advantages from prospective mergers
- "anticipated " not discussed anywhere
(E) experienced less of an increase in stock value when a prospective merger was announced
..yes . correct . - finding of study 3.
hope it helps.
Posts: 4
I can eliminate other answers to choose C but I can not understand why C is true. Are "professed goals" = level of profitability? Is it common knowledge?
Quote:
JAIN09
Joined: 18 Feb 2017
Last visit: 20 Jan 2019
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GPA: 3.35
GMATNinja
hello GMATNinja
I narrowed down to option C and E, but marked the wrong answer E.
of course the studies suggest that bidding firms are not making profits from the merger and acquisition. Shall not the study discourage new merger and acquisitions?
Quote:
Quote:
The question specifically asks about the outcomes of corporate mergers and acquisitions with respect to acquiring firms.
Immediately after the author cites three studies that raise questions challenging why firms should initiate and consummate mergers and acquisitions, the author says:
- Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones.
If mergers and acquisitions remain common, then the findings cited in the passage are not discouraging firms from initiating and consummating them. The author may intend to discourage acquiring firms, but despite the findings from studies cited, this outcome has not been achieved. For this reason alone we eliminate choice (E). But as you've noted, choice (C) is much more strongly supported by the passage, so in a contest between these two choices, (C) wins easily.
I hope this helps!
_________________
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GMATNinja
Hi GMATNinja,
I think i do not absolutely understand "frequency" in choice E,
IMO, a part of the passage states why appeal acquisitions, but does not invlove the frequency of acquisitions,
would you please clarify further.
Thanks in advance
Have a nice day
>_~
zoezhuyan
I'm happy to clarify further, zoezhuyan.
As we've reviewed before, the passage states:
Quote:
And here's choice (E) again:
Quote:
If mergers and acquisitions are a common practice, then they take place regularly. This is a kind of frequency. So (E) essentially states, "Factors other than economic benefit to the acquiring firm help to explain how often they occur."
You can think the same way when saying that a practice is uncommon, irregular, or atypical; these are all ways of saying that a practice doesn't happen often. Choice (E) is stating that these alternate factors help to explain why mergers and acquisitions remain common, and that's why it's the best choice available.
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siddharthfrancis
Evidence in the passage:
It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive compensation of executives, lack of monitoring by boards of directors, and managerial error in estimating the value of firms targeted for acquisition. Alternatively, the acquisition acts of bidders may derive from modeling: a manager does what other managers do.
70. The author of the passage implies that which of the following is a possible partial explanation for acquisition behavior during the 1970s and 1980s?
(A) Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were => in the passage it says "a manager does what other managers do", but does it say anything about why they imitate others?. Hence this choice might be partially correct & watch out for the use of "primarily" since GMAT is pretty neutral (unless it is stated explicitly in the passage)
(B) Managers miscalculated the value of firms that were to be acquired => "managerial error in estimating the value of firms targeted for acquisition", now this is a restatement of the info in the passage
(C) Lack of consensus within boards of directors resulted in their imposing conflicting goals on managers. => same as A, this stem introduces the second part which does not appear in the passage
(D) Total compensation packages for managers increased during that period. => same as A & B, mentioned compensation but introduces 'increased during that period"
(E) The value of bidding firms’ stock increased significantly when prospective mergers were announced. => "the stock of the prospective acquiring firm tends to increase in value much less than does that of the firm for which it bids.", it does not increased significantly
Hope it helps!
P1- Even with the flaws, mergers remain common.
P2- trying to explain above raised concerns.
Main point - acquisitions, their flaws, why they are there.
64. The primary purpose of the passage is to
(A) review research demonstrating the benefits of corporate mergers and acquisitions and examine some of the drawbacks that acquisition behavior entails -- benefits of corporate mergers/ no
(B) contrast the effects of corporate mergers and acquisitions on acquiring firms and on firms that are acquired - no
(C) report findings that raise questions about a reason for corporate mergers and acquisitions and suggest possible alternative reasons - yes. why acquisitions defined.
(D) explain changes in attitude on the part of acquiring firms toward corporate mergers and acquisitions - no
(E) account for a recent decline in the rate of corporate mergers and acquisitions - no
---------------------------------------------------------
65. The findings cited in the passage suggest which of the following about the outcomes of corporate mergers and acquisitions with respect to acquiring firms?
One study showed, for example, that acquiring firms were on average unable to maintain acquired firms’ pre-merger levels of profitability. A second study concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms. A third demonstrated that, following the announcement of a prospective merger, the stock of the prospective acquiring firm tends to increase in value much less than does that of the firm for which it bids.
(A) They include a decrease in value of many acquiring firms’ stocks. - no
(B) They tend to be more beneficial for small firms than for large firms. - no
(C) They do not fulfill the professed goals of most acquiring firms. - yes, this one must be the answer.
(D) They tend to be beneficial to such firms in the long term even though apparently detrimental in the short term. - no
(E) They discourage many such firms from attempting to make subsequent bids and acquisitions. - no
---------------------------------------------------------
66. It can be inferred from the passage that the author would be most likely to agree with which of the following statements about corporate acquisitions?
anchor - corporate acquisitions
(A) Their known benefits to national economies explain their appeal to individual firms during the 1970s and 1980s.- no
(B) Despite their adverse impact on some firms,they are the best way to channel resources from less to more productive sectors of a nation’s economy. - we donr know about it.
(C) They are as likely to occur because of poor monitoring by boards of directors as to be caused by incentive compensation for managers. - this made the factor huge. well its not the main reason.
(D) They will be less prevalent in the future, since their actual effects will gain wider recognition. - no
(E) Factors other than economic benefit to the acquiring firm help to explain the frequency with which they occur. - yes
It seems that factors having little to do with corporate economic interests explain acquisitions.
---------------------------------------------------------
67. The author of the passage mentions the effect of acquisitions on national economies most probably in order to
(A) provide an explanation for the mergers and acquisitions of the 1970s and 1980s overlooked by the findings discussed in the passage - no
(B) suggest that national economic interests played an important role in the mergers and acquisitions of the 1970s and 1980s - no
(C) support a noneconomic explanation for the mergers and acquisitions of the 1970s and 1980s that was cited earlier in the passage - no
(D) cite and point out the inadequacy of one possible explanation for the prevalence of mergers and acquisitions during the 1970s and 1980s - y; well no one explanation is there.
(E) explain how modeling affected the decisions made by managers involved in mergers and acquisitions during the 1970s and 1980s - no
---------------------------------------------------------
68. According to the passage, during the 1970s and 1980s bidding firms differed from the firms for which they bid in that bidding firms
(E) experienced less of an increase in stock value when a prospective merger was announced - y
the stock of the prospective acquiring firm tends to increase in value much less than does that of the firm for which it bids.
---------------------------------------------------------
69. According to the passage, which of the following was true of corporate acquisitions that occurred during the 1970s and 1980s?
look into P1
(D) The gains realized by most acquiring firms did not equal the amounts expended in acquiring target firms. - no
A second study concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms.
---------------------------------------------------------
70. The author of the passage implies that which of the following is a possible partial explanation for acquisition behavior during the 1970s and 1980s?
(A) Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were. - no
(B) Managers miscalculated the value of firms that were to be acquired - yes; managerial error in estimating the value of firms targeted for acquisition. best of the lot.
(C) Lack of consensus within boards of directors resulted in their imposing conflicting goals on managers. - No; lack of monitoring by boards of directors.
(D) Total compensation packages for managers increased during that period. - no; the incentive compensation of executives
(E) The value of bidding firms’ stock increased significantly when prospective mergers were announced.- no
P2- trying to explain above raised concerns.
Main point - acquisitions, their flaws, why they are there.
64. The primary purpose of the passage is to
(A) review research demonstrating the benefits of corporate mergers and acquisitions and examine some of the drawbacks that acquisition behavior entails -- benefits of corporate mergers/ no
(B) contrast the effects of corporate mergers and acquisitions on acquiring firms and on firms that are acquired - no
(C) report findings that raise questions about a reason for corporate mergers and acquisitions and suggest possible alternative reasons - yes. why acquisitions defined.
(D) explain changes in attitude on the part of acquiring firms toward corporate mergers and acquisitions - no
(E) account for a recent decline in the rate of corporate mergers and acquisitions - no
---------------------------------------------------------
65. The findings cited in the passage suggest which of the following about the outcomes of corporate mergers and acquisitions with respect to acquiring firms?
One study showed, for example, that acquiring firms were on average unable to maintain acquired firms’ pre-merger levels of profitability. A second study concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms. A third demonstrated that, following the announcement of a prospective merger, the stock of the prospective acquiring firm tends to increase in value much less than does that of the firm for which it bids.
(A) They include a decrease in value of many acquiring firms’ stocks. - no
(B) They tend to be more beneficial for small firms than for large firms. - no
(C) They do not fulfill the professed goals of most acquiring firms. - yes, this one must be the answer.
(D) They tend to be beneficial to such firms in the long term even though apparently detrimental in the short term. - no
(E) They discourage many such firms from attempting to make subsequent bids and acquisitions. - no
---------------------------------------------------------
66. It can be inferred from the passage that the author would be most likely to agree with which of the following statements about corporate acquisitions?
anchor - corporate acquisitions
(A) Their known benefits to national economies explain their appeal to individual firms during the 1970s and 1980s.- no
(B) Despite their adverse impact on some firms,they are the best way to channel resources from less to more productive sectors of a nation’s economy. - we donr know about it.
(C) They are as likely to occur because of poor monitoring by boards of directors as to be caused by incentive compensation for managers. - this made the factor huge. well its not the main reason.
(D) They will be less prevalent in the future, since their actual effects will gain wider recognition. - no
(E) Factors other than economic benefit to the acquiring firm help to explain the frequency with which they occur. - yes
It seems that factors having little to do with corporate economic interests explain acquisitions.
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67. The author of the passage mentions the effect of acquisitions on national economies most probably in order to
(A) provide an explanation for the mergers and acquisitions of the 1970s and 1980s overlooked by the findings discussed in the passage - no
(B) suggest that national economic interests played an important role in the mergers and acquisitions of the 1970s and 1980s - no
(C) support a noneconomic explanation for the mergers and acquisitions of the 1970s and 1980s that was cited earlier in the passage - no
(D) cite and point out the inadequacy of one possible explanation for the prevalence of mergers and acquisitions during the 1970s and 1980s - y; well no one explanation is there.
(E) explain how modeling affected the decisions made by managers involved in mergers and acquisitions during the 1970s and 1980s - no
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68. According to the passage, during the 1970s and 1980s bidding firms differed from the firms for which they bid in that bidding firms
(E) experienced less of an increase in stock value when a prospective merger was announced - y
the stock of the prospective acquiring firm tends to increase in value much less than does that of the firm for which it bids.
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69. According to the passage, which of the following was true of corporate acquisitions that occurred during the 1970s and 1980s?
look into P1
(D) The gains realized by most acquiring firms did not equal the amounts expended in acquiring target firms. - no
A second study concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms.
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70. The author of the passage implies that which of the following is a possible partial explanation for acquisition behavior during the 1970s and 1980s?
(A) Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were. - no
(B) Managers miscalculated the value of firms that were to be acquired - yes; managerial error in estimating the value of firms targeted for acquisition. best of the lot.
(C) Lack of consensus within boards of directors resulted in their imposing conflicting goals on managers. - No; lack of monitoring by boards of directors.
(D) Total compensation packages for managers increased during that period. - no; the incentive compensation of executives
(E) The value of bidding firms’ stock increased significantly when prospective mergers were announced.- no
Saumya2403
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siddharthfrancis ,
[b]Can someone please explain why the answer is B for question 70. Thanks !![/b]
Q70 says:
70. The author of the passage implies that which of the following is a possible partial explanation for acquisition behavior during the 1970s and 1980s?
(A) Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were.-- no where mentioned in passage
(B) Managers miscalculated the value of firms that were to be acquired. see below mentioned in passage
(C) Lack of consensus within boards of directors resulted in their imposing conflicting goals on managers. extreme to be taken
(D) Total compensation packages for managers increased during that period. out of scope
(E) The value of bidding firms’ stock increased significantly when prospective mergers were announced. not mentioned anywhere in passage
'B' is the correct answer as it is explicitly stated in 2nd last line of last paragraph (highlighted):
Acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests. It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive compensation of executives, lack of monitoring by boards of directors, and managerial error in estimating the value of firms targeted for acquisition. Alternatively, the acquisition acts of bidders may derive from modeling: a manager does what other managers do.
[b]Can someone please explain why the answer is B for question 70. Thanks !![/b]
Q70 says:
70. The author of the passage implies that which of the following is a possible partial explanation for acquisition behavior during the 1970s and 1980s?
(A) Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were.-- no where mentioned in passage
(B) Managers miscalculated the value of firms that were to be acquired. see below mentioned in passage
(C) Lack of consensus within boards of directors resulted in their imposing conflicting goals on managers. extreme to be taken
(D) Total compensation packages for managers increased during that period. out of scope
(E) The value of bidding firms’ stock increased significantly when prospective mergers were announced. not mentioned anywhere in passage
'B' is the correct answer as it is explicitly stated in 2nd last line of last paragraph (highlighted):
Acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests. It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive compensation of executives, lack of monitoring by boards of directors, and managerial error in estimating the value of firms targeted for acquisition. Alternatively, the acquisition acts of bidders may derive from modeling: a manager does what other managers do.
hbawa993
69. According to the passage, which of the following was true of corporate acquisitions that occurred during the
1970s and 1980s?
(A) Few of the acquisitions that f rms made were subsequently divested.
(B) Most such acquisitions produced only small increases in acquired firms’ levels of profitability.
(C) Most such acquisitions were based on an overestimation of the value of target firms.
(D) The gains realized by most acquiring firms did not equal the amounts expended in acquiring target firms.
(E) About half of such acquisitions led to long-term increases in the value of acquiring firms’ stocks.
Here is what we know from studies:
- Acquiring firms were on average unable to maintain acquired firms’ pre-merger levels of profitability.
(B) is incorrect. It says there were small increases in profitability.
- Post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms.
Exactly what (D) says.
Following the announcement of a prospective merger, the stock of the prospective acquiring firm tends to increase in value much less than does that of the firm for which it bids.
- (E) is not implied in any way.
(A) is not discussed. We don't know anything about how many were divested later. As for (C), we know that managerial error in valuing target firms may have been responsible but were MOST such acquisitions based on it? We don't know.
Answer (D)
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