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The treasury division of Marengo Co, a large quoted company, holds equity investments in various companies around the world. One of the investments is in Arion Co, in which Marengo holds 200,000 shares.
however in the answer:
Edward may be correct that Marengo Co should not hold equity investments. This is not
a core area of business for Marengo Co and it may be best not to focus on it and
therefore sell all the shares.sir my question is that marengo is a quoted company which holds equity investments… then why does the answer says that it is not a primary business?
I assume that you are looking at the question in the BPP Revision Kit.
The original exam question made no mention of Edward (and therefore the examiners answer did not include the statement you quote). BPP have added this bit simply to turn it from a 20 mark question (which is was originally) into a 25 mark question.
The problem is that we do not know what Marengo’s core business is. It is just the treasury department who are investing surplus cash in investments, and it is the responsibility of the treasure department to invest short-term surpluses in a way that generate returns but at the same time does not involve much risk.
BPP would have been better to have written “this might not be a core area of business….” because, again, the question does not tell us what their core business is.
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