Advantages of the Method of Least Squares Over the High-Low

question 38

Multiple Choice

Advantages of the method of least squares over the high-low method include all the following EXCEPT

• A)a statistical method is used to mathematically derive the cost function.
• B)only two points are used to develop the cost function.
• C)the squared differences between actual observations and the line (cost function) are minimized.
• D)all the observations have an effect on the cost function.

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Definitions:

Investment

The allocation of resources, usually money, in order to earn income or profit over time.

Partial Equity Method

An accounting method used when an investing company has significant influence over, but not full control of, another company, requiring the investor to record its share of profits.

Equity Method

The Equity Method is an accounting technique used to record investments in other companies, recognizing the income earned from the investment proportional to ownership.

Dividends

Cash disbursements issued to shareholders by a company, commonly originating from the organization's earnings.