LBO Capital Structure

This question practices the basic mechanics of LBO financing, including the role of senior debt, subordinated debt, and sponsor equity in funding an acquisition. Candidates need to understand how leverage is layered into the capital structure, why lenders provide the most secure tranches first, and why private equity firms still contribute a meaningful equity check. Interviewers ask this because LBO financing is central to private equity investing, and a strong answer shows you understand both the sources of capital and the incentives created for management and the sponsor.