Leveraged Buyout · LBO Modeling
Minimum Cash Balance
This question asks why an LBO model needs to assume a minimum cash balance on the target company’s balance sheet.
Interview question
- Difficulty
- Easy
- Topic
- Leveraged Buyout
- Subtopic
- LBO Modeling
What this question trains
This problem tests whether you understand how an LBO model treats cash that must remain in the business for operations rather than being treated as excess cash available to the buyer. It also checks your grasp of how the debt schedule and balance sheet are linked, since the model has to keep enough liquidity to support day-to-day needs and working capital requirements while still reflecting transaction financing accurately. Interviewers ask this because they want to see if you understand the practical constraints behind LBO assumptions, not just the mechanics of the model.