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    Question

    Consider the following statements regarding the

    privatization of the public sector enterprises: 1. Privatization is the liquidation of government’s equity. 2. The purpose of the privatization is generally to improve fiscal health of the government along with modernization of the firm. 3. Government companies are converted into private companies in five ways. Which of the above statements is/are correct?
    A 1 only Correct Answer Incorrect Answer
    B 2 only Correct Answer Incorrect Answer
    C Both 1 and 2 Correct Answer Incorrect Answer
    D 3 only Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Privatization implies the shedding of the ownership or management of a government-owned enterprise i.e. liquidation of the assets. The purpose of the sale is mainly to improve financial discipline and facilitate modernization. Government companies are converted into private companies in two ways: By the withdrawal of the government from ownership and management of public sector companies and/or by the outright sale of public sector companies.

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