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Sarcosine Chemicals Corp

question 102

Multiple Choice

Sarcosine Chemicals Corp. issues stock in one of its operating units and sets it up as a separate company called Prussic Corp., with its own board of directors and corporate officers. Sarcosine Chemicals Corp. then distributes the stock in Prussic Corp. to its existing stockholders. Which of the following forms of divestitures does this scenario exemplify?

Definitions:

Invested Assets

Assets that have been purchased or acquired for the purpose of generating income or profit, not for immediate resale.

Minimum Return

The lowest acceptable rate of return on an investment that a manager or investor is willing to accept.

Residual Income

Residual income is the amount of net income generated in excess of the minimum rate of return. It's often used to assess the performance of business units.

Invested Assets

Resources or funds that have been allocated for investment purposes in various types of assets, such as stocks, bonds, or real estate, aiming for potential returns.