In a Leveraged Buyout (LBO)

question 142

Multiple Choice

In a Leveraged buyout (LBO) :

• A)an acquiring company uses a great deal of debt to acquire a debt free target.
• B)private investors buy the company's stock using debt that's secured by the firm's own assets.
• C)the target's debt is eliminated by the buyer's leverage resulting in a debt free company.
• D)the buyers purchase the stock with their own money which leaves them free to borrow heavily using their stock as collateral.

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Definitions:

Operating Activities

Business actions directly related to its day-to-day operations, such as selling products or services, which generate revenue and expenses.

Amortization Expense

The systematic allocation of the cost of an intangible asset over its useful life.

Book Value

The value of an asset according to its balance sheet account balance, which represents the cost of the asset minus any depreciation, amortization, or impairment costs.

Disposal

Disposal refers to the act of selling, discarding, or removing an asset from a company's balance sheet, often due to obsolescence, excess, or replacement.