Which of the Following Is Incorrect with Respect to Leverage

question 42

Multiple Choice

Which of the following is incorrect with respect to leverage buyouts (LBOs) ?

• A) They originated in the 1960s and were originally known as bootstrap transactions that reflected the general consensus that the firm was, more or less, paying for its own acquisition.
• B) The typical LBO uses a ratio of 70 percent debt to 30 percent equity but levels of debt can reach much higher.
• C) LBOs are an extreme example of re-leveraging because debt is used to buy out the majority of the equity holders to gain control of the firm.
• D) None of the statements are incorrect.

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Definitions:

Error Signal

A signal generated to indicate a discrepancy between a desired outcome and an actual outcome, used for correction in control systems.

Feedback Signal

A signal sent back to the control system from the output, used to correct or adjust the system to maintain desired performance.

Set Point

The desired or target value for a process variable in a control system.