Which of the Following Is Incorrect? an Analyst Should Be

question 54

Multiple Choice

Which of the following is incorrect? An analyst should be aware of the following when analyzing a company that has significant investments recorded using the equity method.

• A)Cash flow received from investee may be substantially different from investment income recorded.
• B)As investee's liabilities are not recorded on the company's balance sheet, there may be significant off-balance-sheet financing.
• C)They must mark investment in investee to market even though there may be no ready market in which they can sell their investment.
• D)Company must record pro rata share of investee's earnings, which may not be well correlated with changes in market value of investee.

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Definitions:

Producer Surplus

The difference between the amount a producer is paid for a good compared to the minimum amount they would be willing to accept for it, a measure of producer welfare.

Price

The sum of money needed to buy a product, service, or commodity.

Quantity

The amount or number of a material or immaterial good considered as a unit or in discrete amounts.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive in the market.