Suppose a Firm Needs Fresh Capital,but Its Management Does Not

question 22

True/False

Suppose a firm needs fresh capital,but its management does not want to give up its controlling interest.The existing shares could be labeled Class A,and then Class B shares with limited voting rights could be issued to outside investors.

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Definitions:

Hedge Funds

Investment funds that employ various strategies to earn active returns for their investors, including leveraging, derivatives, and short selling.

Private Investment Companies

Firms that invest pooled funds from investors in a variety of assets, not publicly traded and often focusing on wealth management.

Qualified Investors

Individuals or entities that meet specific financial criteria set by regulatory authorities, allowing them to invest in certain complex and potentially riskier investments.

Leverage

The use of borrowed capital to increase the potential return of an investment, also referring to the ability to influence situations or people to achieve a particular outcome.