Preferred Stock Often Is Issued in LBO Transactions, Because It

question 47

True/False

Preferred stock often is issued in LBO transactions, because it provides investors a fixed income security, which has a claim that is junior to common stock in the event of liquidation.

---

Definitions:

Economic Costs

The total cost of choosing one action over another, including both explicit (direct monetary costs) and implicit (opportunity costs) factors.

Long-Run Equilibrium

A state in a market where all resources are optimally allocated and economic forces are balanced, with no tendency for change until external conditions change.

Perfect Competition

A market structure characterized by many sellers and buyers, homogeneous products, and free entry and exit, resulting in price takers.

Economic Profit

The difference between a business's total revenue and its total costs, including both explicit and implicit costs.