Leveraged buyouts (LBOs) almost always involve:
I. a large part of the purchase price is financed mostly by debt
II. most of this debt is below investment grade (junk)
III. the firm goes private and its shares are no longer traded on the open market
A) I only
B) II only
C) III only
D) I, II, and III

Question

Quizplus · Accepted Answer

All three statements are true about leveraged buyouts (LBOs). LBOs involve financing a large part of the purchase price with debt, typically below investment grade. This helps the buyer increase their return on equity, but also increases the risk of default. As part of the LBO, the target firm goes private and its shares are no longer traded on the open market.

Leveraged Buyouts (LBOs) Almost Always Involve