A Leveraged Buyout Refers to

question 56

Multiple Choice

A leveraged buyout refers to

• A)a firm restructuring itself by selling off unrelated units of the company's portfolio.
• B)a firm pursuing its core competencies by seeking to build a top management team that comes from a similar background.
• C)a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private.
• D)an action where the management of the firm and/or an external party buy all of the assets of a business financed largely with equity.

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Definitions:

Joint Products

Products that are generated together from the same raw materials or production process, where the costs are difficult to allocate to each product individually.

Split-off Point

marks the stage in a production process where multiple products are generated from common inputs, necessitating allocation of costs among the products.

Avoidable Cost

A cost that can be eliminated (in whole or in part) by choosing one alternative over another in a decision. This term is synonymous with relevant cost and differential cost.

Fixed Costs

Expenses that do not change with the level of production or sales activity, such as rent or salaries.