An Advantage of the Equity Method Over the Fair Value

question 23

True/False

An advantage of the equity method over the fair value method is that it prevents an investor from manipulating its own income by exerting influence over the amount and timing of investee dividends.

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Definitions:

Variable Costs

Costs that change in proportion to the level of output or activity in a business.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums, remaining constant regardless of business activity levels.

Organizational Response

Refers to how an organization reacts to external or internal events, changes in the market, or other pressures to maintain or improve its standing.

Labor Strike

A work stoppage caused by the mass refusal of employees to work, typically to protest against terms of employment.