The Distribution of Shares in a Subsidiary to Existing Parent

question 305

Multiple Choice

The distribution of shares in a subsidiary to existing parent company stockholders is called a(n) :

• A) Lockup transaction.
• B) Bear hug.
• C) Equity carve-out.
• D) Spin-off.
• E) Split-up.

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Definitions:

Financial Leverage

The use of borrowed funds to increase the potential return of an investment, which also increases the risk of loss.

Sensitivity of EPS

The degree to which a company's earnings per share (EPS) is affected by fluctuations in its operating income.

ROE

A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Target Capital Structure

The optimal mix of debt, preferred stock, and common equity that a company aims to maintain for financing its operations.