Consolidated Financial Statements Are Useful Because

question 89

Multiple Choice

Consolidated financial statements are useful because

• A) investors of the parent company want a clear financial picture of the total economic entity.
• B) minority shareholders need the consolidated information to make good investment decisions.
• C) they are much more detailed than the statements for the individual companies.
• D) the parent and subsidiaries constitute a single legal entity, and the financial statements should reflect that fact.

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Definitions:

Minimum Operating Lease Payments

The minimum amount that a lessee is obligated to pay over the lease term for the right to use an underlying asset, excluding costs such as maintenance and taxes that are paid by the lessee.

Sales-Type Lease

A lease agreement in which the lessor recognizes immediate profit on the leased asset, as if it were sold, typically used in capital leasing.

Operating Lease

A contract allowing the use of an asset without transferring ownership rights, typically with shorter terms than a finance lease.

Implicit Interest Rate

This reflects the cost of borrowing, calculated from the lease terms, used to measure the present value of lease payments.