Series 79 practice questionmediumLeveraged Buyouts
In leveraged buyouts, which company attribute is most attractive to lenders evaluating debt capacity?
- AVolatile cash flows
- BHigh capital expenditure requirements
- CStable and predictable cash flows✓ Correct answer
- DMinimal asset base
Explanation
Why C — Stable and predictable cash flows
Stable, predictable cash flows give lenders confidence in timely debt repayment, thus supporting higher leverage. Volatility or high capex reduces an LBO’s debt capacity.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 995+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related M&A, Tender Offers & Restructuring questions
- A buyer is acquiring a business through an asset purchase rather than a stock purchase. Which type of liability is most…
- A break-up fee in a merger agreement is best described as:
- In an MBO, which of the following is a common way for management to demonstrate alignment with new equity owners?
- In a going-private transaction involving affiliates, which SEC rule requires enhanced disclosure and procedural…
- Which anti-takeover defense involves having only a portion of the board up for election in any given year?
- In a merger agreement, a Material Adverse Change (MAC) clause typically will NOT allow the buyer to terminate the deal…
- According to standard industry practices, which of the following is typically disclosed in a fairness opinion letter?
- If a tender offer is oversubscribed and the bidder cannot purchase all shares tendered, which method must be used to…
