What type of investment methodology is used when a company holds less than 20% equity in another company?

The Investments in Securities Method is the correct choice when a company holds less than 20% equity in another company. This approach generally indicates that the investor does not have significant influence over the operating and financial policies of the investee. In accounting, such investments are typically reported at fair value or cost, depending on the specific accounting standards applied.

When a company owns less than 20% of another company’s stock, it does not usually trigger the necessity for consolidation or applying equity methods, which are typically reserved for larger ownership stakes that allow the investor to exert influence or control. Instead, the investment is treated more like a financial asset. This classification helps in properly reflecting the nature of the investment in the company's financial statements.

Significant influence, which would shift it to different accounting methodologies, is generally recognized when ownership is at least 20%, which is not the case here. Thus, understanding the implications of ownership percentages on investment reporting is crucial for accurate financial representation.