Business Studies Course - Investment
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Informal email - Reading

Read this email and then answer the questions opposite. When you have finished, click 'answers' to check your results.

aebweb@temne.co.uk 112.231.000.1 g.dalton@hotmail.com 10&(meM@wlkerteck.net.ca ienglish@biscuit.co.uk/sharetrade

Hi Ivan -

You asked me to keep an eye on what is happening with Gerberman. I don't know where you got your info from, but it looks as though you have struck oil. Personally I thought that the management buy-out had gone so well that the company would not want to be absorbed by a bigger competitor. Still, I considered what you said about the company being highly leveraged, and that this was affecting the price/earnings ratio on the shares.

In fact, the more I looked at it, the more I decided that it would be worth shadowing your investment with a few grand from my own pocket. If all goes well, we will make a good profit from the dividend, and the share value will increase again after that. Gerberman has been in talks with Holler Electric, and the two companies are a good fit. I understand that Holler will make an offer for Gerberman before the end of the month.

It is quite probable that Holler Electric will offer a premium of about 12% on the current price, so the shares should be a nice little earner over the next fortnight. Since the takeover will not be hostile and Gerberman shareholders will benefit, it looks like everyone will do well - except for Holler's competitors, of course :>

By the way, I've decided to sell my Crossfire holding - the share price has been underperforming for the last month or so, and I'm looking for a new prospect to put the investment into. But with the market so flat, Gerberman is the only interesting one I can find!

Gerry.

Disclaimer: the comments on this communication represent the views of a named individual, and do not reflect the opinions or policies of Temne plc.

 

1. Where does this text come from?
a. A letter from a friend.   
b. A business report.   
c. An internet site.   
d. An e-mail.   

2. How can this text best be described?
a. Informal.   
b. Businesslike.   
c. Curt.   
d. Detailed.   

3. What does the writer admit?
a. A management buy-out went well.   
b. The takeover will not be hostile.   
c. That Ivan was right.   
d. That he was watching Gerberman.   

4. What is the writer's purpose?
a. To tell Ivan to buy shares.   
b. To ask for a dividend.   
c. To admit he was wrong.   
d. To give good news.   

5. Why is Gerberman being sold?
a. It owes too much money to be profitable.   
b. The market is too flat.   
c. It is being taken over.   
d. It has to pay a dividend.   

6. When does the writer expect to make some money?
a. Immediately.   
b. Until the end of the month.   
c. When the company is purchased.   
d. Before the dividends are distributed.   

7. What does the writer think of Holler's purchase?
a. It is too expensive.   
b. It is bad for competition.   
c. He has no opinion.   
d. He thinks it is a good idea.   

8. The writer of this letter might be ...
a. A share dealer.   
b. A journalist.   
c. A businessman.   
d. Any of the above.   

ANSWERS