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Governance in Investing Quiz

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Questions and Answers

What is one reason why governance is a crucial consideration in investing?

It reflects management's past performance.

It is irrelevant in emerging markets.

It impacts the valuation and target price significantly. (correct)

It only focuses on five-year forecasts.

How does experience in the asset class emphasize the importance of governance in investing?

By emphasizing the need for a high standard of governance in emerging markets. (correct)

By showing the potential downside from the target price of up to 60%.

By highlighting the need for a low standard of governance in emerging markets.

By suggesting the need for selection and exclusion lists.

What is the approach to investing in a flawed governance universe?

Developing a one-year financial forecast.

Creating selection and exclusion lists.

Using nine different criteria to score companies. (correct)

Focusing on companies with low improvement potential.

How can a low governance score impact a company's valuation?

Result in a downside from the target price of up to 60%. Signup and view all the answers

What does relying on consistent reporting and transparency during the investment process help achieve?

Aiding in developing a five-year financial forecast. Signup and view all the answers

What does governance reflect in investing?

Management's forward-looking ability, reliability, and transparency Signup and view all the answers

How does a low governance score impact a company's target price?

It decreases the target price significantly Signup and view all the answers

What impact do selection and exclusion lists have on investing in a flawed governance universe?

They focus on companies with improvement potential Signup and view all the answers

How are companies scored on governance in investing?

Using nine different criteria Signup and view all the answers

Why is a high standard of governance important in emerging markets for investing?

To ensure reliable management and transparency Signup and view all the answers

Study Notes

Governance is a crucial consideration in investing as it reflects management's forward-looking ability, reliability, and transparency.
The investment process involves developing a five-year financial forecast, relying on management, consistent reporting, and transparency.
Experience in this asset class highlights the importance of governance in investing, emphasizing the need for a high standard of governance in emerging markets.
The approach to investing in a flawed governance universe involves avoiding selection and exclusion lists, focusing on companies that show improvement potential.
Nine different criteria are used to score companies on governance, impacting the valuation and target price significantly.
Even if some companies trade at low levels currently, a low governance score can lead to a downside from the target price of up to 60%.

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Description

Test your knowledge on governance considerations in investing, including management's forward-looking ability, financial forecasting, and the impact of governance on valuation and target price.