The Acquisition of a Public or Private Company That Is

question 1

Multiple Choice

The acquisition of a public or private company that is financed largely by debt is referred to as a leveraged buyout, or LBO. Which of these statements is true of the LBO craze of the 1980s?

• A)The amount of the purchase price that could be funded by debt was legally capped at 40%.
• B)The amount of the purchase price funded by debt was typically less than 50%.
• C)The amount of the purchase price funded by debt was as high as 90%.
• D)The amount of the purchase price funded by debt was legally capped at 70%.

---

Definitions:

Elastic

A characteristic of demand or supply where a change in price leads to a significant change in the quantity demanded or supplied.

Price Elasticity

A measure of the responsiveness of the quantity demanded or supplied of a product or service to a change in its price.

Bread

A staple food made primarily of flour, water, and yeast or another leavening agent, baked into a variety of forms and eaten worldwide.

Total Expenditures

The aggregate amount of spending on goods and services in an economy over a specified period.