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:

Consumer Surplus

The difference between the maximum price a consumer is (or consumers are) willing to pay for an additional unit of a product and its market price; the triangular area below the demand curve and above the market price.

Net Benefit

Net benefit refers to the total positive effects or advantages of a decision or action, minus any costs or negative effects associated with it.

Creative Destruction

A process where new innovations cause the demise of older industries or technologies, leading to economic growth and development.

Economic Recession

A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.