Which one of the following correctly reflects the effects on the financial statements caused by the increase in the market price of long-term passive equity investments?

Question

Quizplus · Accepted Answer

An increase in the market price of long-term passive equity investments would be reflected in the balance sheet as an increase in the value of investments, which would not affect the current ratio. However, it would result in an increase in the earnings generated from those investments, which would increase earnings per share (assuming the number of shares outstanding remains the same). Therefore, the correct choice is A, where the current ratio is unchanged and earnings per share increases.

Which One of the Following Correctly Reflects the Effects on the Financial