Chartered Investment Banking Analyst Quiz

Under which of the following situations is using the Equity Method inappropriate for an Investor’s financial reporting?

A. The Investor owns 25% of the common stock of the Investee, and exerts significant control through representation on the board of directors.

B. The Investor owns 22% of the common stock of the Investee, and has failed to elect a representative to the Investee’s board because the remaining 78% of the shares are owned by a family that opposes the Investor’s interference.

C. The Investor owns 19% of the common stock of the Investee, and has representation on the Investee’s board.  Furthermore, the Investor accounts for 45% of the revenues of the Investee.

D. The Investor forms a Joint Venture (JV) with another company; each party owns 50% of the JV, and major policy and strategy decisions must be agreed to by both parties.

Reveal the Answer

The answer is B) Even though the investor owns 22% of the stock of the Investee, the Investor lacks significant influence because he is opposed by a party that controls the remaining shares of the company. The investor also lacks representation on the board.

What is the Chartered Investment Banking Analyst™?

The CIBA program develops the complete set of desk-ready skills to succeed in the competitive world of corporate finance and investment banking. Candidates will develop familiarity with US GAAP and IFRS accounting standards, learn how to value investment projects under conditions of uncertainty, acquire essential financial modeling skills, be able to assess the credit quality of companies and gain a thorough understanding of the M&A process from target company identification to funding strategies and deal structuring.

The CIBA curriculum comprises five Professional Certificates. Four of the Certificate programs are week-long in-person offerings offered over 4 contiguous weeks, while the fifth Certificate is offered as a week-long in-person class or a digital class that can be completed remotely at your own pace.

“Always look for schools that have a good reputation. Always look up the person who is giving the lectures, it has to be someone who has a great experience. I believe NYIF offers all of this, it has a variety of courses that offer introductory, intermediate, and advanced courses and good lectures.”

Aziz

November 2019, Chartered Investment Banking Analyst™

About The New York Institute of Finance

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