Equity Investments - Equity Investments Section 2
1. As compared to public equity markets, operating in the private market:
- Option : A
- Explanation : Public firms are under pressure from shareholders to meet shorter-term demands. Compared to this, private firms are better able to focus on longer-term value creation opportunities.
2. The most likely candidates for a management buyout (MBO) are firms with:
- Option : C
- Explanation : Firms with (1) large amounts of undervalued assets which can be sold to reduce debt; and (2) that generate high levels of cash flows which can be used to make interest and principal payments on the debt are most likely candidates for management buyout transactions.
- Option : B
- Explanation : Options A and C are reasons for investing in domestic companies. Option B is not a reason because restrictions on capital flows makes it harder (not easier) for local companies to raise capital.
5. Which of the following is most accurate with respect to Level II listed ADR?
- Option : C
- Explanation : Level II (listed) ADRs have high listing fees. A and B are false statements.
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