Which of the Following Statements Regarding Exit Strategies Is FALSE

question 105

Multiple Choice

Which of the following statements regarding exit strategies is FALSE?

• A) An alternative way to provide liquidity to its investors is for the company to become a publicly traded company.
• B) An important consideration for investors in private companies is their exit strategy, or how they will eventually realize the return from their investment.
• C) Often large corporations purchase successful start-up companies. In such a case, the acquiring company purchases the outstanding stock of the private company, allowing all investors to cash out.
• D) Roughly 25% of venture capital exits from 2001-2005 occurred through mergers or acquisitions.

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Definitions:

Holding-period Return

The overall profit earned from owning an asset or a collection of assets for a certain duration, taking into account both earnings and growth in value.

Dividend

Money distributed by a corporation to its shareholders, often as a share of the earnings.

Reward-to-volatility Ratio

A ratio used to assess the return of an investment relative to its risk, calculated by dividing the excess return of an investment by its standard deviation.

Standard Deviation

A statistical measure of the dispersion of a set of data from its mean, often used to quantify the risk associated with a particular investment.