If the Investor Holds Enough Common Shares to Control the Investee

question 2

True/False

If the investor holds enough common shares to control the investee (more than 50% common share ownership),then the two corporations are no longer separate accounting entities and therefore may no longer maintain separate accounting records.

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Definitions:

Equity Cost

This is the cost of financing a company through equity, representing the compensation that the firm must pay to its equity investors.

Equity Risk Premium

The extra return that investors require for choosing equity over risk-free securities, accounting for the higher risk of stocks.

Business Valuation

The process of determining the economic value of a whole business or company unit based on its financial performance and position.

Intrinsic Value

The actual worth of an asset or investment, determined through fundamental analysis without reference to its market value.