The equity method causes the investment account to mirror the proportional changes in book value of the investee.
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Explanation:

The equity approach is an accounting methodology that a company uses to record profits gained in another corporation through its expenditure. With the accounting equity process, the creditor company considers on its financial statements the revenue generated by the other entity, in a sum equal to the ratio of its equity stake in the other firm.

In other words, The equity theory recognizes the concrete economic connection among two individuals. The creditor documents on the financial statements the portion of the return on that investment as profits from the company.

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.

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