Company B Has 40,000 Shares of Its Common Stock Outstanding

question 8

Multiple Choice

Company B has 40,000 shares of its common stock outstanding.Company A owns 35,000 shares of Company B stock.Company A should use the _____ method to account for its investment in Company B.

• A)market
• B)equity
• C)cost
• D)consolidated

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Definitions:

Quick Ratio

A financial metric that measures a company's ability to meet its short-term obligations with its most liquid assets; also known as the acid-test ratio.

Current Assets

Assets that are expected to be converted into cash or used up within one year or one business cycle, whichever is longer.

Current Liabilities

Short-term financial obligations due within one year, such as accounts payable and short-term loans.

TIE

The Times Interest Earned (TIE) ratio is a financial metric that measures a company's ability to meet its debt obligations based on its current income.