A popular financial strategy in which a company is acquired in a transaction financed largely by debt and eventually paid with money generated from the acquired company's operations or by sale of its assets is
A) illegal in most countries.
B) a good way to build a core competency.
C) an application of the capital asset pricing model.
D) the leveraged buyout.
E) an example of internal financing.

Question

Quizplus · Accepted Answer

The given scenario is describing the concept of a leveraged buyout, where a company is acquired through a transaction funded mostly by debt, which is eventually paid back using the assets or generated income of the acquired company. This strategy is not illegal and can be seen as a way to build a core competency, but it is not an application of the capital asset pricing model or an example of internal financing.

A Popular Financial Strategy in Which a Company Is Acquired