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1. Potential voting rights from call options held by an investor should be taken into account in determining whether power over the investee exists, but only when the call options are "out of the money". 2. An investor's rights must be substantive to give rise to power over the investee.

1. Potential voting rights from call options held by an investor should be taken into account in determining whether power over the investee exists, but only when the call options are "out of the money". 2. An investor's rights must be substantive to give rise to power over the investee.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1. Potential voting rights from call options held by an investor should be taken into account in determining whether power over the investee exists, but only when the call options are "out of the money". 2. An investor's rights must be substantive to give rise to power over the investee. 3. Protective rights such as the ability to remove key management personnel under restricted circumstances do not contribute to establishing power over the investee. 4. If unanimous consent is required from two or more investors, this gives rise to power over the investee. Ture of false?
Transcribed Image Text:1. Potential voting rights from call options held by an investor should be taken into account in determining whether power over the investee exists, but only when the call options are "out of the money". 2. An investor's rights must be substantive to give rise to power over the investee. 3. Protective rights such as the ability to remove key management personnel under restricted circumstances do not contribute to establishing power over the investee. 4. If unanimous consent is required from two or more investors, this gives rise to power over the investee. Ture of false?
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