When Defining a Reportable Segment, Which of the Following Conditions

question 56

Multiple Choice

When defining a reportable segment, which of the following conditions would be sufficient to allow a company to combine two operating segments for purposes of testing?

• A) The products sold by each segment are produced in the same plant.
• B) Both segments have several customers in common.
• C) The segments may sell different products, but they have a similar economic environment and similar business activities.
• D) Both segments are required to adhere to U.S. Department of Labor regulations regarding immigration laws.
• E) Both segments are owned by the same parent company.

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Definitions:

Debt-Equity Ratio

A measure of a company's financial leverage, calculated by dividing its total liabilities by its shareholders' equity, indicating the proportion of debt used to finance assets.

Additional Debt

This refers to any extra borrowing taken on by an entity beyond its existing debt obligations.

Operating Capacity

The maximum output that a business can produce using its current resources and facilities without additional investment.

Dividend Payout Ratio

A financial metric that measures the percentage of a company's earnings paid to shareholders in the form of dividends.