Leveraged Buyouts (LBOs) Almost Always Involve

question 59

Multiple Choice

Leveraged buyouts (LBOs) almost always involve:
I. a large part of the purchase price is financed mostly by debt
II. most of this debt is below investment grade (junk)
III. the firm goes private and its shares are no longer traded on the open market

• A) I only
• B) II only
• C) III only
• D) I, II, and III

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Definitions:

Variable Expenses

Costs that change in proportion to business activity or production volume, such as materials costs, direct labor, and utilities for machinery.

Minimum Required Rate Of Return

The lowest acceptable return on an investment, used as a benchmark for evaluating potential investments.

Average Operating Assets

This refers to the average value of the assets used in operations over a certain period, which can indicate the efficiency of asset use in generating income.

Sales

The revenue generated from the selling of goods or services by a company or an enterprise to its customers.