Which of the following characteristics of a firm would limit the firm's attractiveness as a potential LBO candidate?
A) Substantial tangible assets
B) High reinvestment requirements
C) High R&D requirements
D) B and C
E) All of the above

Question

Quizplus · Accepted Answer

High reinvestment requirements and high R&D requirements indicate that the firm may require significant ongoing capital expenditures, which would limit the amount of debt that can be taken on in an LBO. Substantial tangible assets would actually make the firm a more attractive LBO candidate, as these assets can be used as collateral for the debt financing.

Which of the Following Characteristics of a Firm Would Limit