Consolidated Financial Statements

question 20

Multiple Choice

Consolidated financial statements:

• A)are prepared if the parent owns more than 20% of the investee's voting stock.
• B)do not include a consolidated statement of cash flows because investors need to understand the separate cash flows of the parent and each individual subsidiary.
• C)allow investors to gain a better perspective on total operations than they could by examining the reports of the parent and each individual subsidiary.
• D)do not identify the amount of noncontrolling interest in subsidiaries' stock because investors do not focus on that information.

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Definitions:

Debt Ratio

A financial ratio that measures the extent of a company's leverage, calculated by dividing total liabilities by total assets.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations based on its income before interest and taxes.

Current Ratio

A financial metric that compares a company's current assets to its current liabilities, indicating the liquidity and short-term financial health of the business.

Progressive Discipline System

A structured approach to dealing with employee behavioral issues that progressively increases in severity.