The following are advantages of spin-offs:
A)They widen investor choice by allowing them to invest in just one part of the business, and they can improve incentives for managers.
B)They widen investor choice by allowing them to invest in just one part of the business; they can improve incentives for managers; and by spinning off businesses with "poor fit," parent firms can concentrate on their core businesses.
C)They widen investor choice by allowing them to invest in just one part of the business; they can improve incentives for managers; by spinning off businesses with "poor fit," parent firms can concentrate on their core businesses; and they relieve investors of the worry that funds will be siphoned off from one business to support unprofitable capital investments in another.
D)By spinning off businesses with "poor fit," parent firms can concentrate on their core businesses, and they relieve investors of the worry that funds will be siphoned off from one business to support unprofitable capital investments in another.

Question

Quizplus · Accepted Answer

Choice C includes all of the advantages listed in A and B, but also adds the important benefit of relieving investors of worries that funds will be used for unprofitable investments in another part of the business. This is a significant concern for many investors, and by spinning off businesses, the parent company can focus on core operations and potentially generate higher returns for shareholders.

The Following Are Advantages of Spin-Offs