Part 1 of question - In 1989 the most famous (infamous) Leverage Buy Out (LBO) was completed - the buyout of RJR-Nabisco by the takeover kings KKR. One of KKR's concerns was the spending of millions of dollars on a fleet of 6 corporate jets. an LBO means that the take-over company borrows an enormous amount of money (often by issuing speculative, or "junk" bonds) and uses those borrowed funds to buy-back the common stock.

Part 2 ( need answered) continuing with the rjr situation an lbo means that the takeover company borrows an enormous amount of money and uses those borrowed funds to buy back common stock. after the takeover which of the following ratios would be the best indicator that this has happened

a) quick ratio

b) ACP, average collection period

c) TIE, times interest earned

D) net profit margin