Which of the Following Is Not an Indicator That Requires

question 38

Multiple Choice

Which of the following is not an indicator that requires a sponsoring firm to consolidate a variable interest entity (VIE) with its own financial statements?

• A) The sponsoring firm has the obligation to absorb potentially significant losses of the VIE.
• B) The sponsoring firm receives risks and rewards of the VIE in proportion to equity ownership.
• C) The sponsoring firm has the right to receive potentially significant benefits of the VIE.
• D) The sponsoring firm has power through voting rights to direct the entity's activities that significantly impact economic performance.
• E) The sponsoring firm is a primary beneficiary fo the VIE.

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Definitions:

Economic Profits

Economic profits are the financial gains that occur when the revenue from business activities exceeds the costs, expenses, and the opportunity costs of all resources employed.

Monopolistically Competitive

Describes a market structure where many firms sell products that are similar but not identical, leading to competition based on product differentiation, price, and marketing.

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including rent, wages, and insurance premiums.

Short Run

A time period in economics during which at least one input is fixed and cannot be changed by the business.