1. Which of the following statements accurately describe spin-offs?

A spin-off is the simplest way to make a firm more focused.

None of the other statements are correct.

More than one of the other statements are correct.

In a spin-off, the parent firm keeps significant ownership of the spun-off firm.

In a spin-off, the shares of the spun-off firm are distributed to existing shareholders.

2. Which of the following statements accurately describe dividend policy?

Increasing dividends usually signal that managers believe the firm has poor cash flow prospects in the future.

None of the other statements are correct.

Managers are usually willing to increase dividends even if the increase in earnings is likely to be unsustainable.

High dividend payout policy can increase the potential conflict between managers and shareholders.

More than one of the other statements are correct.