The Equity Method Should Generally Be Used to Account for an Investment

question 98

Multiple Choice

The equity method should generally be used to account for an investment in stock when the level of ownership is

• A) less than 10%.
• B) between 10% and 20%.
• C) between 20% and 50%.
• D) 10% or more.

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Definitions:

Modigliani

Refers to Franco Modigliani, an Italian-American economist known for his work on corporate finance, the Modigliani-Miller theorem, and the life-cycle hypothesis of saving.

Developed

Pertains to countries that have a high level of industrialization, a high standard of living, and a well-established economic structure.

Evaluating Mutual Funds

The process of assessing the performance, management, and investment strategies of mutual funds to determine their suitability for an investor.

Rank Portfolios

The process of arranging portfolios in order according to a certain criterion, such as return or risk.