The sale of a unit of a firm to existing management is often achieved through
A) a leveraged buyout.
B) an employee stock option.
C) a cash exchange.
D) a limited partnership.

Question

Quizplus · Accepted Answer

A leveraged buyout (LBO) involves the management team borrowing money to purchase the unit from the parent company. This allows the management team to have more control and ownership of the unit, while also potentially benefiting from increased profits and growth of the unit. Employee stock options and cash exchanges do not necessarily involve existing management purchasing the unit, and a limited partnership typically involves outside investors being brought in as part-owners rather than existing management solely owning the unit.

The Sale of a Unit of a Firm to Existing