Which statement best explains a "leveraged buyout"?
A)A purchase where a small portion of the purchase price is raised by borrowing against the acquired assets.
B)A purchase where a significant portion of the purchase price is raised by borrowing against the acquired assets.
C)A purchase that is deemed too risky from a solvency perspective for the shareholders.
D)A purchase that is deemed too risky from a solvency perspective for the bondholders.

Question

Quizplus · Accepted Answer

A leveraged buyout is a type of acquisition in which a significant portion of the purchase price is raised by borrowing against the acquired assets. The acquired company's assets are often used as collateral for the loans. This allows the acquiring company to make a large purchase with a small amount of its own capital.

Which Statement Best Explains a "Leveraged Buyout