Question

The management team of a privately held firm found a lender who would lend them 90 percent of the purchase price of the firm if they pledged the firm’s assets as well as their personal assets as collateral for the loan. This purchase would best be described by which of the following terms?

Group of answer choices

A.Merger

B.Leveraged buyout

C.Joint venture

D.Tender offer

E.Consolidation

Answer 1

B. Leveraged buyout.

Since the assets of the acquired company are being used as collateral, this form of purchase can be called as leveraged buyout.

Merger will occur when a company acquires a certain portion of another company's assets for a value.

Joint venture is an entity in which two or more entities invest.

Tender offer is made by a acquirer to all the stock holders to sell their shares at a particular date, time etc.

Consolidation means presenting the financial statements of group entities in a single statement.