Why Would a Private Equity Firm Use Leverage in a Buyout

question 26

Multiple Choice

Why would a private equity firm use leverage in a buyout?

• A)It looks better on the balance sheet.
• B)It reduces the initial investment.
• C)It leaves more cash available for restructuring.
• D)The interest payments are tax deductible.

---

Definitions:

Consumption Models

Business models that are based on the consumption of goods or services rather than their purchase, typically involving subscriptions or pay-per-use arrangements.

Necessary Knowledge

Essential information or understanding required to perform tasks, make decisions, or solve problems in a specific domain or activity.

GEO

is an abbreviation for Geostationary Earth Orbit, a circular orbit around the Earth having a period of 24 hours, often used for satellite communications and weather monitoring.

LEO

Low Earth Orbit, referring to the orbit of a satellite at an altitude between 160 to 2,000 kilometers above Earth's surface.