The Strategy of Investors Who Are Attempting a Leveraged Buyout

question 342

Multiple Choice

The strategy of investors who are attempting a leveraged buyout is to:

• A)Shape up the company for quick resale.
• B)Use debt to finance the buyout of the firm's stockholders and gain control of the firm themselves.
• C)Secure ownership of all of the existing stock in a company by issuing and selling large amounts of new stock.
• D)Use investment tax credits from the government to acquire all of the physical assets owned by the firm.

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Definitions:

Pro Forma Assets

Projected assets of a business, listed in a financial statement prepared in anticipation of future events or transactions.

Owner's Equity

The residual interest in the assets of an enterprise after deducting its liabilities, often referred to as net assets.

Long-Term Assets

Assets that are expected to provide economic value to a business for more than one year, such as property, plant, and equipment.

Economic Climate

The overall state of the economic environment, characterized by factors such as growth rates, unemployment, inflation, and consumer confidence.