One of the primary factors evaluated when a company is pursuing a leveraged buyout is
A) Net cash flow.
B) Free cash flow.
C) Cash flow from financing activities.
D) Cash flow from investing activities.

Question

Quizplus · Accepted Answer

Free cash flow is the cash left over after all operating expenses, capital expenditures, and taxes have been paid, and is an important factor in evaluating a company's ability to repay debt. This is particularly important in a leveraged buyout, where a significant amount of debt is used to finance the acquisition. The higher the free cash flow, the more likely the company is to be able to repay the debt, making it a primary factor in the evaluation process.

One of the Primary Factors Evaluated When a Company Is