When the Equity Method Is Used to Account for Stock

question 147

True/False

When the equity method is used to account for stock investments, the carrying value of an investment is computed as the cost of the investment and adjusted to fair value as of the balance sheet date.

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Definitions:

Short-Term Financing

Short-term financing involves borrowing funds to meet immediate business needs for a period typically less than a year.

Cyclical

Refers to businesses or stocks that are heavily affected by economic changes, often experiencing higher growth in positive economic conditions and contractions during downturns.

Non-Cyclical

Refers to industries or stocks that are relatively unaffected by economic downturns or declines because they provide essential goods or services that continue to be in demand.

Cash Cycle

The amount of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.