To purchase two electronic retailers,SoundTrak Inc.borrows $40 million from banks and raised $8 million through preferred stock.After the deal closes,SoundTrak Inc.uses $20 million of cash and assets from one of the acquired retailer to clear $25 million of the bank loan.This is an example of

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This scenario is an example of a leveraged buyout (LBO), where SoundTrak Inc. uses borrowed funds (the $40 million from banks) and some equity (the $8 million through preferred stock) to acquire companies, and then uses the assets of the acquired company to pay off a portion of the debt incurred to finance the acquisition.

To Purchase Two Electronic Retailers,SoundTrak Inc