If an Investor Owns Less Than 20% of the Ordinary

question 101

Multiple Choice

If an investor owns less than 20% of the ordinary shares of another corporation as a long-term investment,

• A) the equity method of accounting for the investment should be employed.
• B) no dividends can be expected.
• C) it is presumed that the investor has relatively little influence on the investee.
• D) it is presumed that the investor has significant influence on the investee.

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Definitions:

Ultimatums

Final demands or conditions issued by one party to another, often threatening specific consequences if not met.

Psychological Imbalance

A state where there is an unevenness in cognitive or emotional aspects within a person, possibly affecting decision-making and behavior.

Lack of Sophistication

Lack of sophistication in negotiations refers to a minimal level of skill, expertise, or complexity displayed by one or more parties.

Inadequate Skill

Lacking sufficient ability, expertise, or competency to perform a task or handle a situation effectively.