A leveraged buyout allows the purchaser to use the assets of the compa

QUESTION

A leveraged buyout allows the purchaser to use the assets of the company being acquired as security for the loan being used to finance the purchase.

Indicate whether the statement is true or false.

ANSWER

Answer: TRUE
Explanation: In a leveraged buyout, one firm borrows money to buy another firm. If earnings continue to grow, the debt can be paid off. But if things go wrong, the debt can become a crushing burden.