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:

Asset Management

The systematic process of developing, operating, maintaining, and selling assets in a cost-effective manner.

Spot Market

A public financial market in which commodities or financial instruments are traded for immediate delivery and payment.

Bulk Sales

Transactions involving large quantities of goods, often at a discount.

Barbecue Sauce

A flavoring sauce used as a marinade, basting, or topping for meat cooked in the barbecue cooking style.