Vocabulary* Define the following terms:
- a. LBO
- b. MBO
- c. Spin-off
- d. Carve-out
- e. Asset sale
- f. Privatization
- g. Leveraged restructuring
a)
To define: The LBO.
Explanation of Solution
Define LBO:
LBO is said to be leveraged buyouts in which the debt financing would be used for the purchase of a business. The stocks of the company would no longer trade in the open market if the firm goes private.
b)
To define: The MBO.
Explanation of Solution
Define MBO:
MBO is said to be Management buyouts, which is a buyout that is commenced by the existing management.
c)
To define: The spin-off.
Explanation of Solution
Define spin-off:
The spin-off is the new company that is created by the parent company with the part of its operations and assets. The shares in the new business would be distributed to the stockholders of the parent company.
d)
To define: The carve-out.
Explanation of Solution
Define carve-out:
Carve-out is like a spin-off. However, in carve-out, the new business’s share will be sold in a public offering.
e)
To define: The asset sale.
Explanation of Solution
Define asset sale:
The asset sale is said to be the sale of a specific asset rather than the sale of an entire firm.
f)
To define: The privatization.
Explanation of Solution
Define privatization
In privatization, the government-owned business will be purchased by private investors.
g)
To define: The leverage restructuring.
Explanation of Solution
Define leverage restructuring:
Leverage restructuring is the process of increasing the debt-equity ratio. Here, the company would increase the debt and the debt proceeds would be paid to the stockholders. Hence, it would increase the debt-equity ratio.
Want to see more full solutions like this?
Chapter 32 Solutions
PRIN.OF CORPORATE FINANCE
- Direction: discuss how the following models are used. • Merger & Acquisition (M&A) Model• Initial Public Offering (IPO) Model• Forecasting Model• Budget Model• Discounted Cash Flow (DCF) Modelarrow_forwardExplain briefly what the terms working capital and working capital management imply. Explain the link between current asset policy and liquidity, profit, and risk as well as any other considerations. Which policy do you believe is the best?arrow_forwardDefine cost of new external common equityarrow_forward
- Explain briefly what working capital and working capital management are and what they do. Explain the link between current asset policy and liquidity, profit, and risk as well as any other relevant factors. So, which policy do you believe to be the most beneficial?arrow_forwardIt is the financial flexibility of an enterprise: a.) liquidity b.) solvency c.) financial structure d.) capacity for adaptationarrow_forwardUse a pie chart to illustrate the sources that comprise a hypothetical companys total value. Using another pie chart, show the claims on a companys value. How is equity a residual claim?arrow_forward
- A statement of financial position allows investors to assess all of the following except the___. Select one: a. capital structure of the enterprise b. liquidity and financial flexibility of the enterprise c. efficiency with which enterprise assets are used d. net realizable value of enterprise assetsarrow_forwardDetermining optimum capital structure is a. An investment decision b. A financing decision c. A dividend decision d. liquidity decisionarrow_forwardVenture capital is a.debt resource b. Profit resource c. Internal financial resource d. External financial resourcearrow_forward
- (b) Discuss and distinguish the following concepts a. Money markets and capital markets b. Asset Allocation and Asset Selection c Active and passive Investment strategies d. Technical and Fundamental Analysisarrow_forwardexplain the unique characteristics of the asset class, their associated risks and potential returns. Foreach asset class, you should use one or two examples to support your explanation. Asset Class Characteristics Risk Potential Returns ExampleCash Products Fixed Income Equities CurrenciesDerivativesarrow_forwardG, Total Asset Turnover Sales/ Total Assets g. Asset Turnover h. Comment on the results of your analytical work above. What strengths, weaknesses or developing problems do you see in yourselected company? i. From a sustainable finance point of view, is your selected company a good one to invest in? Justify your answer based on yourresearch of the company.arrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTIntermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College