A Company Should Always Use the Equity Method to Account

question 98

Multiple Choice

A company should always use the equity method to account for an investment if:

• A) it has the ability to exercise significant influence over the operating policies of the investee.
• B) it owns 30% of another company's stock.
• C) it has a controlling interest (more than 50%) of another company's stock.
• D) the investment was made primarily to earn a return on excess cash.
• E) it does not have the ability to exercise significant influence over the operating policies of the investee.

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Definitions:

Myelin Sheaths

Insulating layers that form around nerves, including those in the brain and spinal cord, which enable faster transmission of electrical impulses.

Sympathetic Nervous System

A part of the autonomic nervous system that activates the body's fight-or-flight response during perceived threats.

Parasympathetic Nervous System

Part of the autonomic nervous system responsible for conserving energy and promoting a state of calm and rest in the body.

Central Nervous System

The part of the nervous system consisting of the brain and spinal cord, responsible for processing and sending out neural signals.