A common feature of an LBO structure is a. the minimal use of debt financing. b. a cash sweep, which is a covenant requiring all excess cash be used to retire debt. c. projected rates of return that explicitly and precisely account for the risks associated with these investments. d. its limited use in only providing seed capital to start-up firms. e. none of the above.

Funding risk is the risk that a firm will not be able to meet its short-term financial obligations when due.   Select one: True False

When close to the zone of insolvency, managers have an incentive to gamble. This is known as    Question  options:   a)  an agency cost of debt that covenants cannot attenuate   b)  an agency cost of equity known as fraudulent conveyance    c)  an agency cost of debt that negative covenants can attenuate   d)  an agency cost of debt that positive covenants can attenuate

The pecking order states that firms should:  Group of answer choices issue debt first. use internal financing first. always issue debt then the market won't know when management thinks the security is overvalued. issue new equity first.