If an Investor Owns Less Than 20% of the Common

question 6

Multiple Choice

If an investor owns less than 20% of the common stock of another company as a long-term investment:

• A) the equity method of accounting should be used for the investment.
• B) no dividends are expected to be received.
• C) the investor usually has little or no influence on the investee.
• D) the investor has significant influence on the investee.

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Definitions:

Consumption

The use of goods and services by households, or the action of using up a resource.

Income

The amount of money or goods that an individual or entity receives in exchange for providing a good or service, or through investing capital.

Utility Functions

Representations that quantify the satisfaction or happiness consumers gain from consuming various bundles of goods and services.

Fair Allocations

In economics and game theory, it refers to the distribution of resources or goods among participants in such a way that the allocation is considered equitable according to certain criteria.