Question

Which of the following best describes a leveraged buyout fund’s acquisitions?

1.Investing in mid-sized businesses
2.Investing in early stage businesses
3.Investing in foreign businesses
4.Investing in mature businesses

Answer 1

Answer:

3 investing in foreign businesses

Answer 2

2.Investing in early stage businesses

Explanation:

• A leveraged buyout (LBO) is the purchase of another company by one company, using a large amount of "borrowed capital" to cover the acquisition costs. The purchased firm 's assets are also used as "collateral" for the loans, together with the purchasing company's properties.
• The utilisation of debt, that usually has a lower cost of capital than equity, helps to minimise the total cost of the "acquisition financing". The debt burden is lower since interest payments also lower the "corporate income tax" obligation, whereas "dividend payments" do not. This decreased borrowing cost helps the equity to benefit more, and as a consequence, the debt acts as a tool to raise the equity.
• LBO refers to purchasing another business using substantial portion of money that is lent to cover acquisition costs. Investing in "early-stage companies" better represents an acquisition of LBO assets, as a LBO need is a profitable and growing company.

To know more

In leveraged buyout a firm is acquired in a transaction which is ...

https://brainly.in/question/7062488