Exam 25: Corporate Portfolio Strategy

With respect to emerging markets and developed markets,which of the following is most accurate concerning the role and importance of having influence on critical stakeholders in determining who is the best owner of a business?

On a given list,which is most likely the first step in adding value?

With respect to owning and adding value to a consumer packaged-goods business,a firm with great manufacturing skills would probably be a better owner than a firm with distinctive skills in developing and marketing brands.

Better governance refers to the way the company's owners (or their representatives )interact with the management team,and it is often a way private equity firms add value to acquisitions.

Which of the following are true concerning diversification and/or diversified firms? I.Diversified firms have higher levels of debt. II.There is strong evidence that diversification adds value. III.Investors can diversify their portfolios at lower cost than companies can. IV.There is strong evidence that diversified firms have smoother cash flows.

Which of the following would be the LEAST likely way a private equity firm could add value to an acquired company?

Traditional screening approaches are the best way to apply the best-owner principle.

The type of owner that qualifies as best for a business may change over the course of the business's life cycle and will probably vary with its geography.

Which of the following would be the LEAST likely way a conglomerate could add value to an acquired company?

Which of the following are valid reasons a given firm might be the best owner of a particular business? I.Unique links with other businesses (e.g. ,distribution lines). II.Distinctive skills such as advertising. III.Better governance. IV.Better insight and foresight.

Define corporate governance and describe the evidence of the role it can play in value creation from studies of the returns of private equity firms investing in companies.