Asset Based Lending Is Commonly Used to Finance Leveraged Buyouts

question 28

Multiple Choice

Asset based lending is commonly used to finance leveraged buyouts. Which of the following is not true about such financing?

• A) The borrower generally pledges tangible assets as collateral.
• B) Lenders look at the target firm's assets as their primary protection.
• C) Bank loans are secured frequently by receivables and inventory.
• D) Loans maturing in more than one year are often referred to as term loans.
• E) The target firm's most liquid assets generally secure longer-term loans.

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Definitions:

Deposits

Deposits refer to the action of placing money into a bank or financial account or the sum of money placed.

Compounded Quarterly

A method of calculating interest where the interest is added to the principal amount four times a year.

Present Value

The now value of a future cash sum or chain of cash flows, with a specified rate of return.

Loan Payments

Regular payments made to repay borrowed money, typically including both principal and interest components.