When a Large Corporation Purchases a New Business Which Is

question 74

True/False

When a large corporation purchases a new business which is included in the consolidated statements for the year, it is not a change in a reporting entity, and it is accounted for prospectively.

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Definitions:

Long-Term Note

A debt security that matures in more than one year and can provide interest income over its term.

Current Ratio

A financial ratio indicating a firm's capacity to settle short-term debts using its current assets.

Operating Cycle

The duration it takes for a company to purchase inventory, sell products or services, and collect cash from customers.

Collect Cash

The process of receiving cash in exchange for goods or services rendered, contributing to a company's cash inflows.