The creation of a high-debt, private corporation with improved cash flow and value is the goal in ________.
A) a spin-off
B) a divestiture
C) a conglomerate merger
D) a leveraged buyout

Question

Quizplus · Accepted Answer

A leveraged buyout (LBO) is a financial transaction in which a company is acquired with a significant amount of borrowed money, which is then repaid using the company's cash flow and assets. The goal of an LBO is to create a highly leveraged, private corporation with improved cash flow and value, hence D is the correct answer. Spin-off refers to a company creating a separate independent company through the sale or distribution of new shares. Divestiture is the process of selling off a subsidiary or a division of a company. A conglomerate merger refers to the merger of companies operating in different industries.

The Creation of a High-Debt, Private Corporation with Improved Cash