small business ch. 13

A leveraged buyout involves a high level of ________ and depends on adequate future ________.

debt, cash flow

A financial buyer is interested in the synergies that can be gained from the acquisition. true or false

false

Double taxation is:

taxation of income that occurs twice—first as corporate earnings and then as stockholder dividends.

Initial public offering (IPO):

the first sale of shares of a company's stock to the public.

Harvesting (exiting) is:

the process used by entrepreneurs and investors to reap the value of a business when they leave it.

Opportunity cost of funds are:

the rate of return that could be earned on another investment of similar risk.

In an IPO, a portion of the firm's equity is sold in public equity markets. true or false

true

Management buyout (MBO):

a leveraged buyout in which the firm's top managers become significant shareholders in the acquired firm.

Bust-up LBO is:

a leveraged buyout involving the purchase of a company with the intent of selling off its assets.

Build-up LBO is:

a leveraged buyout involving the purchase of a group of similar companies with the intent of making the firms into one larger company for eventual sale.

Employee stock ownership plan (ESOP) is:

a method by which a firm is sold either in part or in total to its employees.

Leveraged buyout (LBO):

a purchase heavily financed with debt, where the future cash flows of the target company are expected to be sufficient to meet debt repayments.

Which of the following is NOT one of the basic types of sale transactions when an entrepreneur is harvesting an investment?

Business trade

The financial issues arising from the sale of a firm include the questions of how to value the firm as well as how to structure the sale. true or fals

True