Chapter 1, Problem 10.10EC

State whether the following statements are true or false and justify your answer in each case: a) The investor's relative exposure to the risks and rewards of the investee is known as the investor's 'extent of equity ownership' in the investee. b) The investor's 'extent of equity ownership' in the investee determines whether the investee is equity accounted. consolidated or simply measured as an investment in the investor's consolidated financial statements. c) The investor's degree of influence over an investee increases as the investment changes from a simple investment to a subsidiary.  finally reaching the strongest degree of influence when the subsidiary becomes an associate. d) An investment over which the investor has significant influence is called an associate. e) An investee that is jointly controlled by the investor is called a subsidiary. f) The only instance where the investor may equity account for its investee is when such an investee is classified as an associate. g)…

46.When the economic method is used, the investor will recognize the investment income when: Select one: a. the company in which it invested reports income and the increase in the fair value of the investment. b. Receive dividends from the company you invested in. c. the company that invested reported income. d. the fair value of the investment has increased.

How is an investment banker compensated for promoting and facilitating the sale of a company’s shares to the public?

Imagine you are a member of the team at the investors reviewing the future viability of the Zopa business. On which criteria would you assess the future potential of the business and the returns in your investment based on Zopa’s position in the marketplace and its internal capabilities?

An investment banker most commonly makes money from Group of answer choices A. commissions from buyers. B. artificially supporting the stock price during and after the offering. C. fees from other investment bankers in the syndicate. D. the spread between the issue price and proceeds to the issuer.

What is the important question of corporate finance when a finance manager advises the company’s management to accept or reject a long-term investment project? What the finance manager needs to analyse to justify her/his adviceHow a corporation is different from a partnership in terms of owner, legal status, liabilities, life, regulation, access to capital, taxation and transfer?

A friend who knows you study accounting approaches you to discuss share market investment strategies. They believe deciding which shares to invest in should be based solely on understanding the business model and reading analyst forecasts regarding the company. Is this strategy sound? Why or why not? What other approaches or tools would you recommend to assist in making investment decisions? Discuss.

You are negotiating a transaction for your client, Shark Corporation. Parties on the other side of the deal ask you for information about the structural stability of a building, which is a significant part of the transaction. Coleman, Shark’s tax director, tells you to say that everything is all right when the building has substantial hidden damage. Coleman tells you to say this because it would be more favorable to Shark’s position in the transaction. How would you respond to Coleman’s request? Be sure to cite research that supports your position. What if you have already told the other side that the building is fine when you learn about the problems? What other potential ethics issues do you see in this situation? Which AICPA Code(s) of Professional Conduct rules apply in this situation (explain how and why they apply)?

You are concerned about one of the assets in your diversified portfolio.  You just have an uneasy feeling about the CFO of that particular firm.  You do believe however that the firm makes a good product and that it is appropriately priced by the market.  Should you be concerned about the effect on your portfolio if the CFO embezzles a portion of the firm's cash?  Discuss based on diversification of assets in a portfolio. Further assume your friend is trying to decide to purchase stock from that same company.  She does not hold a diversified portfolio like you do.  Based on the relationship between risk and return, will you be willing to pay a higher price for the stock than her?  Explain