Asked by Laura-Leigh Holley on Jul 14, 2024
Verified
Which of the following statements is not a reason a company may purchase another company's stock?
A) earning a return on excess cash
B) sustain the other company's stock price
C) gaining control of another company's operations
D) developing or maintaining business relationships
Return On Excess Cash
A measure of how effectively a company is using its idle cash, beyond what is needed for its immediate operating needs, to generate returns.
Sustain Stock Price
Efforts or strategies employed by a company to maintain or increase the market value of its shares over time.
Gaining Control
The process of acquiring the ability to direct the affairs of an entity, often through ownership of a majority of its voting shares.
- Comprehend the criteria and rationale for using different accounting methods for investments.
Verified Answer
ND
nadia delgadoJul 19, 2024
Final Answer :
B
Explanation :
Sustaining another company's stock price is not a typical reason for a company to purchase another company's stock. The other options listed (earning a return on excess cash, gaining control of operations, and developing/maintaining business relationships) are all common reasons for a company to invest in another company's stock.
Learning Objectives
- Comprehend the criteria and rationale for using different accounting methods for investments.