Which of the Following Is True of Consolidated Statements

question 17

Multiple Choice

Which of the following is true of consolidated statements?

• A)They combine the balance sheets,income statements,and statements of cash flows of the parent company with those of its peer group firms.
• B)They combine the balance sheets,income statements,but not the statements of cash flows of the subsidiary company using the consolidation method.
• C)They combine the balance sheets,income statements,and statements of cash flows of the subsidiary company with those of its investee firms.
• D)They combine the balance sheets,income statements,and statements of cash flows of the parent company with those of its controlling interest affiliates.

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Definitions:

Unit Contribution Margin

The amount each unit sold contributes towards covering fixed costs and generating profit, calculated as the selling price per unit minus the variable cost per unit.

Operating Income

Earnings before interest and taxes (EBIT), measuring a company's profit from its operational and regular business activities.

Fixed Costs

Expenses that do not change in relation to the volume of production or sales, such as rent, salaries, and insurance.

Operating Leverage

A measure of the relative mix of a business’s variable costs and fixed costs, computed as contribution margin divided by operating income.