Question

Paper was recently terminated as one of a team of five managers of an equity fund. The fund had two value-focused managers and terminated one of them to reduce costs. In a letter sent to prospective employers, Paper presents, with written permission of the firm, the performance history of the fund to demonstrate his past success. What was the reason for terminating one of the value-focused managers?

1) To reduce costs
2) To improve performance
3) To increase diversity
4) To change investment strategy

Answer 1

The value-focused manager was terminated to help the firm reduce costs, as mature firms often seek to optimize efficiency and cut expenses when they have established financial strategies and expect future profits.

Step-by-step explanation:

The reason for terminating one of the value-focused managers was to reduce costs. As organizations develop, they often look for ways to streamline operations and cut expenses when their financial strategies are set and predictable profits are on the horizon. The relevant details in the scenario provided suggest that, as a firm becomes established and outside investors such as bondholders and shareholders become more comfortable providing financial capital, certain internal cost-cutting measures, such as management downsizing, might be taken to ensure the firm's competitiveness and profitability.