A related party transaction may be indicated when another company
A) subsidizes certain operating expenses of the company.
B) purchases its securities at their fair value.
C) loans to the company at market rates.
D) has had a distributor relationship with the company for 10 years.

Question

Quizplus · Accepted Answer

Subsidizing certain operating expenses of the company suggests that the company may have a close relationship with another entity, which is a characteristic of a related party transaction. The other options do not necessarily indicate a related party transaction. Purchasing securities at fair value, loaning at market rates, and having a distributor relationship for 10 years are all common and legitimate business practices.

A Related Party Transaction May Be Indicated When Another Company