Question

A deliberate sale of a part of the capital stock of a company to raise resources and change the equity and/or management structure of a company is known as:

• A. Export Promotion
• B. Devaluation
• C. Disinvestment
• D. Dereservation

Hint:

In the context of government policy, 'disinvestment' is a key term associated with economic reforms, particularly the sale of stakes in Public Sector Enterprises (PSEs). Differentiate it from 'privatization', where the sale results in a transfer of management control to the private sector.

Answer 1

The Correct Option is C

Step 1: Identify the Concept:
The question concerns the term for selling a portion of a company's shares (capital stock) to raise funds and potentially change ownership or management.

Step 2: Explanation:


Disinvestment: This involves selling equity shares of public sector undertakings (PSUs) or other assets by a government or company. Its main aims are to generate funds, increase efficiency via private involvement, and alter ownership/management. This aligns directly with the question's premise.
Export Promotion: This encompasses government policies and incentives aimed at boosting domestic companies' sales of goods and services abroad. It's a trade policy, not a corporate finance strategy.
Devaluation: This is a planned reduction in a country's currency value relative to another currency or standard, a monetary policy tool.
Dereservation: This entails opening industries previously restricted to the public or small-scale sectors to private competition.

Step 3: Conclusion:
The appropriate term for the sale of a part of a company's capital stock is Disinvestment.