Question

    In a leveraged buyout (LBO), what is the primary source

    of funds used for the acquisition of a company?
    A Equity Correct Answer Incorrect Answer
    B Debt Correct Answer Incorrect Answer
    C Preferred stock Correct Answer Incorrect Answer
    D Convertible bonds Correct Answer Incorrect Answer
    E Mezzanine instruments Correct Answer Incorrect Answer

    Solution

    As the name suggests, the primary source of funds used to finance the acquisition of a company in a LBO is debt. The acquiring company uses a significant amount of debt to finance the acquisition, with the intention of using the cash flows from the target company to pay down the debt.

    Practice Next
    More Alternate Sources of Finance Questions
    ask-question