Question

1. Name 3 provisions of Limited Partnership Agreements.
2. What are the differences between venture capital and leveage buyout investments?
3. What are the stages (life cycle) of a typical company in terms of outside investors?
4. What are sometypes of Limited Partners that invest in private equity funds?

Answer 1

Three provisions of limites partnership act as follows :-

1.) Partnership contribution - the limited partnership should outline the capital to be contributed by each partner for the business.

2.) Profit Sharing - it also provides clarity on how the appropriation of the profits will be done to partners

3. Dissolution - when the business happens to liquidate or one of the partners leaves, this defines how the dissolution will be done and how much each partner will get

Differences between ventures capital and leveraged buyout firms is as follows :-

venture capital firms invest in early stage companies, they use equity capital with rounds of financing, risk is higher and the horizon is thinner while leveraged buyout firms invest on high growth and mature companies, risk is lesser and the horizon is broader.

Stages of a life cycle of a company are as follows :-

1.) Seed stage - this is related to the idea stage of a company

2. Early stage - this is the startup or early stage with fewer management and less capital

3. Growth - in growth stage capital increases at a higher growth rate and management and marketing increases

4 . Mature companies - mature companies are companies with stable revenues, stable capital, management and lesser turnaround rate

Sometimes of limited partners that invest in private equity funds are :-

1. ) Pension funds

2.) Endowment funds

3.) Hedge funds

4.) Traditional investment managers

5) sovereign wealth funds

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