All of the Following Are Characteristics of Leveraged Buyouts EXCEPT

question 76

Multiple Choice

All of the following are characteristics of leveraged buyouts EXCEPT:

• A)A large amount of the purchase price is borrowed.
• B)The purchased assets of the bought firm are used as collateral for the buyout.
• C)LBOs have led to enormous wealth increases for the common stockholders of the acquired firm.
• D)The impact of most LBOs has been an increase in the bond ratings of the acquired firm because of the decrease in perceived risk.

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Definitions:

Diseconomies Of Scale

refers to a situation where, as a company or business expands, its production costs increase, leading to a decrease in efficiency.

Resource Endowments

The natural resources, capital, and other economic assets that a country possesses, impacting its economic potential.

World Price

The international market price of a good or service, determined through global supply and demand interactions.

Diminishing Returns

The principle that if one factor of production is increased while others remain constant, the overall returns will eventually decrease after reaching an optimal level.