Concept: Introduction to Cost Method Investments7m
Concept: Investment Classification Summary7m
Which of the following is TRUE about the classification of investments in the equity securities of other companies?
a. Significant influence exists when ownership is 20 to 50 percent of the voting stock.
b. Passive investments exist when ownership is less than 20 percent of the voting stock.
c. Control over the other company exists when ownership of the voting stock exceeds 50 percent.
d. All of the above are true.
Julie Thornton determines that the estimated value of Panera Bread’s stock is $50 a share. Panera is currently trading in the stock market at $52.59 a share. The appropriate investment decision for Julie would be to:
a. Buy Panera’s stock
b. Hold Panera’s stock
c. Sell Panera’s stock
d. Julie does not have enough information to make a prudent investment decision in this situation.