2016年商务英语初级强化测试卷(二)

　　1. Questions on the text:

　　1) What are the latest developments in private equity in recent years?

　　Compared to the 1980s, the targets of today’s private equity groups are much bigger in size. In recent years, the private equity industry has raised record money and its share of mergers and acquisitions has grown massively. The industry has also become a byword for money-making skills but its wealth has also brought many enemies.

　　2) According to the article, what are the main inconveniences for a company to be a publicly quoted company?

　　The main inconveniences for a publicly quoted company include: its executives have to face intrusive media coverage; it has to obey strict and long corporate-governance codes; it also has to face the threats of activist investors and short sellers and the scrutiny by some politicians.

　　3) What are the main reasons for a company to get listed on a stockmarket?

　　Traditionally there are three main reasons to get a company’s share listed on a stockmarket. The first is to raise capital, either to expand the business or to allow the founders to realise their wealth. The second is to help retain staff, who can be offered share options as an incentive to stay and work hard. The third involves prestige; customers, suppliers and potential employees may be reassured (and attracted) by the apparent seal of approval given by a public listing. Meanwhile, being publicly listed gives a company better access to fund investors and retail investors.

　　4) Why are companies in the Anglo-Saxon economies reluctant to borrow from banks?

　　Companies in the Anglo-Saxon economies were reluctant to borrow from banks because their often felt nervous about the possibility of the sudden withdrawal of credit from the banks, due to a change in lending policy, new management or an economic downturn.

　　5) According to the article, what are the main sources for today’s companies to raise money (including equity capital and debt)?

　　Nowadays the main sources for companies to raise money are: first, equity market; second, banks, though much less important than they used to be; third, bond market; fourth, private equity.

　　6) How do private-equity firms respond to the problems identified by Professor Jensen with regard to public companies?

　　Professor Jensen argued that the structure of a public company creates an inherent conflict between investors and the managers they hire to run the business, particularly with regard to the use of free cash flow. He also argued that borrowing imposed discipline on executives. Private-equity firms have applied his argument in practice by gearing up the balance sheets of companies they buy with more debt than public firms are willing to accept. Though private equity firms, in the process, often have a bad reputation for relentlessly cutting unprofitable operations and shedding jobs, academic studies suggest that they create jobs rather than destroy them.

　　7) What are the similarities and differences between today’s private-equity firms and the conglomerates of the 1970s and 1980s?

　　Similarities between today’s private-equity firms and the conglomerates of the 1970s and 1980s are: first, both of them use their financial power to construct diverse industrial empires; second, both claim that they could improve the companies they owned through superior management. The differences are: first, the conglomerates used highly rated shares to buy companies while private-equity firms use borrowed money; second, the conglomerates used to make ever-bigger acquisitions continuously to expand while private-equity firms claim to sell regularly their portfolio companies or business for profit.

　　8) What make it impossible for the private-equity model to become the norm for companies?

　　There are several reasons: first, what might be logical for an individual company might not be best for the economy overall. If all companies were to substitute debt for equity on the scale that private-equity firms have, there would be an increase in the cost of debt. That would lead to lower equity returns; second, since private-equity firms need an exit route to sell their investments, a public market will be needed in the end for someone to realise their profit; third, a bigger role for private equity might make the economy more vulnerable because in a world where most companies carried private-equity-style debt levels, companies would be much more vulnerable and recessions might become much more frequent and consequently monetary policy would become more difficult, and even government revenues might be affected.

　　9) According to the article, what factors have helped the development of private-equity firms since 2003?

　　Those factors are: low interest rates, lots of liquidity and rising asset prices

　　10) What are the signs showing that private-equity firms may now face the peak of the cycle?

　　Those signs are: first, bond yields have been rising, making takeovers more expensive; second, the high level of corporate profits suggests that it could be difficult for private-equity firms to wring more money out of these companies; third, the relentless campaign against private-equity tax privileges may lead to government actions against the interests of private-equity firms; last, more and more private-equity deals often leads to more competition and thus lower returns.