When a Management Team Buys the Firm from Current Shareholders

question 55

Multiple Choice

When a management team buys the firm from current shareholders while continuing to manage and often incurring large segments of debt,it is known as a:

• A) management buyout.
• B) spin-off.
• C) successful greenmail attempt.
• D) corporate breakup.

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Definitions:

Market Rate

The prevailing price or interest rate at which goods, services, or securities are traded in a competitive marketplace.

Shortage

A situation where the demand for a product or service exceeds the supply available at a specified price.

Usury Law

Legislation that sets maximum interest rates that can be charged on loans, to prevent excessive interest.

Market Equilibrium

A market state where the quantity supplied equals the quantity demanded, leading to a balance in price and volume.