ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Time Deposits of large institutions
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Cashless credit issued by banks
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funding a company or business unit with more debt than would be considered normal for that company or industry
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None of the above
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Detailed explanation-1: -What is Leveraged Finance? It is a high-risk, high-return debt funding. It is offered to speculative-grade companies-private equity firms with a debt financing structure. LevFin facilitates recapitalization, debt refinancing, mergers, acquisitions, and leveraged buyout.
Detailed explanation-2: -Financial leverage is when you borrow money to make an investment that will hopefully lead to greater returns. It’s built on the idea of spending money to make money. Examples of financial leverage can include: Buying a home, investing in a business and buying an investment property.
Detailed explanation-3: -Within the investment bank, the Leveraged Finance (“LevFin”) group works with corporations and private equity firms to raise debt capital by syndicating loans and underwriting bond offerings to be used in LBOs, M&A, debt refinancing and recapitalizations.
Detailed explanation-4: -Here’s an example of how a company can use leverage: A company uses $100, 000 of its own cash and a loan of $900, 000 to buy a new factory worth a total of $1 million. The factory generates $150, 000 in annual profit. The company uses financial leverage to generate a profit of $150, 000 on a cash investment of $100, 000.