Which Statement Best Explains a "Leveraged Buyout

question 18

Multiple Choice

Which statement best explains a "leveraged buyout"?

• A)A purchase where a small portion of the purchase price is raised by borrowing against the acquired assets.
• B)A purchase where a significant portion of the purchase price is raised by borrowing against the acquired assets.
• C)A purchase that is deemed too risky from a solvency perspective for the shareholders.
• D)A purchase that is deemed too risky from a solvency perspective for the bondholders.

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Definitions:

Equilibrium Level

Equilibrium level refers to the state in an economy or market where supply equals demand, so there is no tendency for change.

Disposable Income

Available financial assets to households for investments and outlays after income taxes have been applied.

Government Spending

Expenditures by government bodies on goods and services, including salaries, infrastructure, and welfare programs.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.