The Master Company Acquired a 40% Interest in the Dickerson

question 30

Multiple Choice

The Master Company acquired a 40% interest in the Dickerson Company on January 2, 2014, for $1,000,000. During 2014, Dickerson Company paid $100,000 in dividends and reported net income of $270,000. At the end of 2014, the balance in Investment in Dickerson Company should be

• A) $1,000,000
• B) $1,068,000
• C) $1,040,000
• D) $1,108,000

Interpret profitability ratios and their relevance to stakeholders.

Understand the tools and techniques of financial analysis, including ratio, horizontal, and vertical analysis.

Understand the concepts of profitability, solvency, and liquidity in financial context.

Identify and apply different standards for financial statement analysis including intra-company, competitor, and industry standards.

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Definitions:

Perceived Budget Line

The subjective view of the combination of goods and services that a consumer can purchase with their available resources, based on their perception of their budget.

Steeper Slope

Indicates a larger change in the y-value or dependent variable for a given change in the x-value or independent variable on a graph.

Investor

An individual or entity that allocates capital with the expectation of receiving financial returns.

Standard Deviation

Square root of the weighted average of the squares of the deviations of the payoffs associated with each outcome from their expected values.