If an Investor Owns Less Than 20% of the Common

question 16

Multiple Choice

If an investor owns less than 20% of the common stock of another company as a long-term investment:

• A)the equity method of accounting should be used for the investment.
• B)the investor has a controlling interest in the investee.
• C)the investor usually has little or no influence on the investee.
• D)the investor has significant influence on the investee.

---

Definitions:

Physical Capital

Tangible assets such as buildings, machinery, and equipment used in the production of goods and services.

Productivity

The efficiency with which input resources are converted into outputs, often measured as output per hour worked.

Foreign Economies

Economies outside of a reference country or the global network of national economies interacting through international trade.

Stocks and Bonds

Financial instruments that represent ownership in a company (stocks) and loans made to an entity (bonds).