The Accounting for Investments in Another Entity's Equity Instruments Depends

question 95

Multiple Choice

The accounting for investments in another entity's equity instruments depends mainly on

• A) the level of influence the investor is able to exert.
• B) the level of influence the investor actually exerts.
• C) the quality of earnings of the investee.
• D) whether the investee pays dividends.

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Definitions:

Net Income

Net income is the total profit of a company after all expenses and taxes have been deducted from revenue, indicating the company's financial performance over a specific period.

Retained Earnings

The portion of net income that is not distributed to shareholders but is kept by the company to reinvest in its core business or to pay debt.

Net Income

The sum a company holds onto after subtracting expenses and taxes from the total revenue earned.

Cash Dividends

Payments made by a corporation to its shareholders out of the company's current or retained earnings.