The Advantage of Building Up Inventory During the Off Season

question 73

Multiple Choice

The advantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is

• A)very low inventory costs because no inventory needs to be carried from period to period.
• B)much of the expensive capacity would go unused during most months when demand was lower.
• C)in the fact that a firm could get by with a smaller,less expensive factory.
• D)in the fact that a firm could get by with a larger,more expensive factory.

Calculate the effects of intercompany sales and dividends on consolidated financial results.

Understand the accounting treatment for significant influence versus control in investments.

Determine consolidated retained earnings adjustments stemming from subsidiaries.

Explain strategic reasons for a parent company to own less than 100% of a subsidiary.

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Definitions:

Callable Bond

A type of bond that gives the issuer the right to repay the bond before its maturity date, typically at a predefined call price.

Yield to Call

The interest rate that an investor would receive if they held a callable bond until the call date.

Quoted Coupon Rate

This is the annual interest rate paid by a bond, expressed as a percentage of the bond’s face value and fixed for the bond's lifespan.

Zero Coupon Bond

A bond that is issued at a discount to its face value and pays no interest but is redeemed at its face value at maturity.