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Fractal Software Limited Has Acquired a 100% Subsidiary in Malaysia

question 13

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Fractal Software Limited has acquired a 100% subsidiary in Malaysia that produces keyboards and other types of computer hardware.Fractal is refusing to consolidate its financial statements,as this would increase the debt to equity ratio to the point that Fractal would violate its debt agreement,although it would benefit the current ratio with a sizeable increase in inventory.Instead,Fractal would like to record the investment in the Malaysian subsidiary at cost.What type of effect does the non-consolidation have upon the financial statements?


Definitions:

Minimize Losses

Minimizing losses involves implementing strategies to reduce the amount or impact of losses in business operations, investments, or other financial activities.

Demand Curve

A graphical representation in economics showing the relationship between the price of a good and the quantity demanded by consumers at various price levels.

Monopolistically Competitive Market

An economic setup in which numerous companies offer goods that are alike but not identical, granting them some level of control over the market.

Marginal Revenue

The additional revenue that a firm receives from selling one more unit of a good or service.

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