The Investor Should Generally Use the Equity Method of Accounting

question 3

Multiple Choice

The investor should generally use the equity method of accounting for the investee if the investor owns what percentage of the outstanding stock of the investee?

• A) 0%-15%
• B) 20%-50%
• C) any percentage greater than 50%
• D) any percentage greater than 60%

---

Definitions:

Crowding out

A situation where increased government spending leads to reduced investment in the private sector due to higher interest rates or competition for resources.

Government Purchases

Expenditures by government entities on goods and services that are used to provide public services or to benefit the country's economy.

Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulation of the banking industry, and stability of the financial system.

Interest Rates

The cost of borrowing money or the return on invested capital, expressed as a percentage of the principal, affecting economic activity by influencing spending and saving behaviors.