The Following Are Advantages of Private-Equity Partnerships

question 19

Multiple Choice

The following are advantages of private-equity partnerships:
I. carried interest gives the general partners potential for high profits.
II. carried interest, because it a call option, gives the general partners incentives to take risks as they are strongly motivated to earn back the limited partners' investment and deliver a profit.
III. There is no separation of ownership and control and general partners can intervene in the fund's portfolio companies any time performance lags or strategy needs change.
IV. There is no free cash flow problem as cash from first round must be distributed to investors.

• A) I, II and IV only
• B) I and II only
• C) I and IV only
• D) I, II, III and IV

---

Definitions:

Scanner

An optical device that converts printed matter into a format that can be read by the computer and inputs the converted information.

Radial Artery

An artery located in the groove on the thumb side of the inner wrist, where the pulse is taken on adults.

Degrees Fahrenheit

A temperature scale where the freezing point of water is 32 degrees and the boiling point is 212 degrees under standard atmospheric conditions.

Celsius

A scale of temperature on which water freezes at 0° and boils at 100° under standard conditions.