Join thousands of students who trust us to help them ace their exams!Watch the first video
Multiple Choice
Which of the following best describes organizations that invest in equity capital not traded on public exchanges?
A
Exchange-traded funds (ETFs)
B
Mutual funds
C
Commercial banks
D
Private equity firms
Verified step by step guidance
1
Understand the concept of equity capital: Equity capital refers to funds raised by a company in exchange for ownership shares. It can be traded publicly on stock exchanges or privately through private equity firms.
Learn about private equity firms: These organizations invest in equity capital that is not traded on public exchanges. They typically acquire ownership stakes in private companies or take public companies private.
Differentiate private equity firms from other entities: Exchange-traded funds (ETFs) and mutual funds primarily invest in publicly traded securities, while commercial banks focus on lending and other financial services rather than equity investments.
Recognize the role of private equity firms: Private equity firms provide funding to companies in exchange for ownership, often aiming to improve the company's performance and eventually sell their stake for a profit.
Conclude that private equity firms are the correct answer: Based on the explanation, private equity firms best describe organizations that invest in equity capital not traded on public exchanges.