Relationships on the Financial Statements That Do Not Make Sense

question 37

True/False

Relationships on the financial statements that do not make sense may indicate problem areas in the accounts.

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Definitions:

Unrealized Holding Gain

Refers to an increase in the value of an investment that has not been sold yet, thus the gain is not "realized."

Passive Debt Investments

Investments in debt instruments, such as bonds, where the investor does not exert influence over the issuer.

Held-to-maturity

A classification for investment securities which the investor has the intent and ability to hold until a specified maturity date.

Extent of Influence

Refers to the degree to which an investor can sway management decisions and operational policies of an investee due to ownership level or other factors.