Which of the following statements is correct for a firm that has undergone a leveraged buyout?
A) Its shares are traded publicly.
B) Its capital is mostly equity financed.
C) Its shares are not traded publicly.
D) It has a larger shareholder base.

Question

Quizplus · Accepted Answer

A leveraged buyout (LBO) involves a company being acquired with a substantial amount of debt, often provided by private equity firms. The result of the LBO is usually a privately owned company, meaning its shares are not traded publicly. Option A is incorrect because publicly traded companies have shares that are traded on stock exchanges. Option B is incorrect because an LBO typically involves a significant amount of debt financing. Option D is incorrect because an LBO typically results in a smaller shareholder base due to the involvement of private equity firms.

Which of the Following Statements Is Correct for a Firm