In General, Consolidated Financial Statements Should Be Prepared

question 64

Multiple Choice

In general, consolidated financial statements should be prepared

• A) when a corporation owns more than 20% and less than 40% of the common stock of another company
• B) when a corporation owns more than 50% of the common stock of another company
• C) only when a corporation owns 100% of the common stock of another company
• D) whenever the market value of the stock investment is significantly lower than its cost

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Definitions:

Project Profitability Index

A financial metric used to determine the relative profitability of a project, calculated by dividing the present value of future expected cash flows by the initial investment.

Present Value

The present value of a future amount of money or series of cash inflows, considering a particular rate of interest.

Cash Inflows

Money received by a business from its operational, investing, and financing activities.

Discount Rate

The rate utilized in calculating the present value of anticipated future cash flows in discounted cash flow analysis.