Which of the following is true concerning the cash flow approach to determining

Question

Which of the following is true concerning the cash flow approach to determining cash distributions to shareholders?

I. This approach ignores the firm's debt policy
II. This approach measures the cash available for distribution to shareholders
III. This approach relies primarily upon the traditional dividend payout ratio

Select one:

A. I only

B. II only

C. III only

D. I and II only

E. I and III only

F. II and III only

Which of the following divisions would you expect to benefit from a spinoff?

I. A division with largely independent operations doing business in a market substantially different from the parent corporation
II. A division being managed by a parent corporation's managers, who are regarded as highly competent by current and potential investors (the parent corporation's managers will not be in charge of the division after it is spun off)
III. A non-regulated division of a parent corporation that reports consolidated income and is itself under significant regulatory restrictions

Select one:

A. I and II only

B. I and III only

C. II and III only

D. I, II, and III

Explanation / Answer

Q1) 1 and 2 only, option D

Q2)1 and 3 Option B

After Spinoff, for Option B, investor perception towards the parent company decreases as till now content managers have managed the division but so forth it won't be managed post-spinoff and its not a good sign for investors as well as may curtail any benefits as well.

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