Question

When top managers of a mutual company decide they need to raise capital, they go through a process called:

a) Initial public offering (IPO)
b) Capital infusion
c) Demutualization
d) Underwriting

Answer 1

The process by which top managers of a mutual company raise capital by converting to a stock company and selling shares to the public is known as demutualization, which is followed by an IPO.

Step-by-step explanation:

When top managers of a mutual company decide they need to raise capital, they typically go through a process known as demutualization, which is the correct answer to the question. This process involves converting the mutual company into a stock company and then conducting an Initial Public Offering (IPO). An IPO allows the firm to sell its stock to the public, which includes various types of investors like individuals, mutual funds, insurance companies, and pension funds. The funds raised through an IPO are instrumental in repaying early investors such as angel investors and venture capital firms, while also providing financial capital to expand the company's operations.