Which of the Following Statements Is Most CORRECT

question 28

Multiple Choice

Which of the following statements is most CORRECT?

• A) Leveraged buyouts (LBOs) occur when a firm issues equity and uses the proceeds to take a firm public.
• B) In a typical LBO, bondholders do well but shareholders see their value decline.
• C) Firms are forbidden by law to sell any assets during the first five years following a leverage buyout.
• D) Not all target firms are acquired by publicly traded corporations. In recent years, an increasing number of firms have been acquired by private equity firms. Private equity firms raise capital from wealthy individuals and look for opportunities to make profitable investments.
• E) In an LBO sometimes the acquiring group plans to run the acquired company for a number of years, boost its sales and profits, and then take it public again as a stronger company. In other instances, the LBO firm plans to sell off divisions to other firms that can gain synergies. In either case, the acquiring group expects to make a substantial profit from the LBO, but the inherent risks are small due to the heavy use of venture capital and little debt.

---

Definitions:

Service

Aid and assistance provided to others; concern for the well-being and the best interest of another person or group.

Caring Leadership

An approach to leadership that emphasizes empathy, support, and concern for the well-being of team members.

Legislated

The process through which laws are enacted or passed by a governing body.

Alfred North Whitehead

A British philosopher, logician, and mathematician, best known for his work in process philosophy and his development of the metaphysical theory known as process theology.