CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

In a LBO buyout, which components are the most sensitive to the level of the exit?

I. Debt
II. Preference shares
III. PE equity
IV. Management equity
Correct Answer: III and IV

They are expected to increase/decrease significantly depending on the total enterprise exit value.

User Contributed Comments 6

User Comment
poomie83 Could someone explain why this would be the case?
tankdan Redundancies: LBO Buyout, PE equity....
ericczhang Debt and preferreds are claims on fixed payments, do they don't participate in gains on higher equity exits. But PE and management equities directly participate in gains upon exit because they sell their shares.
johntan1979 Keywords: most sensitive
jorellana9 this question is worded awfully vague. I think "level of exit value/enterprise value" would have been a lot more effective
khalifa92 i still dont get the question
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