When a firm distributes shares in a subsidiary to its existing stockholders on a pro rata basis,the firm is doing
A)a reversal.
B)a divestiture.
C)an equity carve-out.
D)a spin-off.
E)a split-up.

Question

Quizplus · Accepted Answer

This is a typical example of a spin-off, where a parent company distributes shares of one of its subsidiaries to existing stockholders on a pro rata basis, creating a new independent company. It allows both the parent company and the new entity to focus on their core businesses and potentially unlock more value for shareholders.

When a Firm Distributes Shares in a Subsidiary to Its