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: Understanding the Concept:
The question asks for the term that describes the act of selling a portion of a company's shares (capital stock) to generate funds and potentially alter its ownership or management control.

Step 2: Detailed Explanation:


Disinvestment: This is the process of selling equity shares of public sector undertakings (PSUs) or other assets by the government or a company. The primary goals are to raise funds for the seller, improve efficiency through private participation, and change the ownership/management structure. This definition perfectly matches the question.
Export Promotion: This refers to government policies and incentives designed to encourage domestic companies to sell their goods and services abroad. It is a trade policy, not a corporate finance action.
Devaluation: This is the deliberate downward adjustment of a country's currency value relative to another currency or standard. It is a monetary policy tool.
Dereservation: This means opening up industries that were previously reserved exclusively for the public sector or small-scale industries to private sector competition.

Step 3: Final Answer:
The correct term for the deliberate sale of a part of a company's capital stock is Disinvestment.