CFA Practice Question

There are 201 practice questions for this study session.

CFA Practice Question

One company-specific factor, size, is used to compare private and public companies. Private companies are typically smaller. The size implications are:

I. There are risk premiums for small size when estimating required rates of return for small companies.
II. Small size may reduce growth prospects by reducing access to capital to fund growth of operations.
III. Small size may incur more operating costs such as compliance costs.
Correct Answer: I and II

Compliance costs are typically costs for public companies.

User Contributed Comments 3

User Comment
davidt876 III is definitely right.

a. private companies can have high compliance costs if they operate in a regulated industry (insurance, investment, banking)

b. there are plenty of other operating costs that are relatively higher for smaller companies - that's why economies of scale is a thing
michaelcfa III is not right. Public companies get funding from public investors and are subject to more scrutinies such as NYSE. Private companies sometimes don't even have to publish their financial statements.
ashish100 Davids trying his best to pass the exam.... by giving you wrong info lol jk

I agree with michaelfakecfa google if u have to
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