Which of the Following Is the Best Theoretical Justification for Consolidated

question 42

Multiple Choice

Which of the following is the best theoretical justification for consolidated financial statements?

• A) In form the companies are one entity; in substance they are separate
• B) In form the companies are separate; in substance they are one entity
• C) In form and substance, the companies are one entity
• D) In form and substance, the companies are separate

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Definitions:

Economic Profits

The difference between total revenues and total costs, including both explicit and implicit costs, representing the additional gain to entrepreneurs beyond the normal profit rate.

Accounting Profits

The financial gain calculated by subtracting total explicit costs from total revenue, according to standard accounting practices.

Industry Expansion

The growth in production, workforce, or market share within a specific sector of the economy.

Constant-cost Industry

An industry in which the costs of production or the prices of inputs do not change as the industry expands or contracts.