Should a company choose to divest a business unit it can create a new company from the business unit with its own shares of stock and its own board of directors. This is called a(n):
A) Satellite company
B) Asset sale
C) Spin-off
D) Re-liquidation

Question

Quizplus · Accepted Answer

A spin-off involves creating a new company from a business unit and giving it its own shares of stock and board of directors, making it a separate and independent entity from the parent company. This allows the parent company to divest the business unit while still maintaining its own operations and assets. A satellite company refers to a subsidiary or affiliate company that is partially or fully owned by another company, but is not necessarily created from a divested business unit. An asset sale involves selling a business unit's assets to another company rather than creating a new company. Re-liquidation is not a term commonly used in business and does not relate to divesting a business unit.

Should a Company Choose to Divest a Business Unit It