Which of the Following Statements Is True Concerning Connecting Affiliations

question 90

Multiple Choice

Which of the following statements is true concerning connecting affiliations and mutual ownerships?

• A) In a mutual ownership, at least two companies in the consolidated group own portions of a third company.
• B) There are at least four companies in a connecting affiliation.
• C) In a connecting affiliation, at least one subsidiary owns stock in the parent company.
• D) In a mutual ownership, the subsidiary owns a portion of the parent's stock.
• E) There are only two companies in a connecting affiliation.

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Definitions:

Risk-loving

Refers to individuals or entities that prefer or are willing to take more risks, often for the possibility of higher returns.

Marginal Utility

The additional satisfaction or benefit received from consuming one more unit of a product or service.

Asymmetric Information

One of the parties to a transaction has information relevant to the transaction that the other party does not have.

Adverse Selection

A situation in which asymmetric information results in high-quality goods or high-quality consumers being squeezed out of transactions because they cannot demonstrate the quality of the product they are offering for sale.