Which of the following is a characteristic of component units?

Component units are entities that are legally separate from the primary government but are closely related to it, such that they must be included in the primary government's financial statements due to their financial dependence. The characteristic that accurately describes them is that they may rely on the primary government for funding. This reliance often indicates that the component unit does not have sufficient resources to meet its obligations without support, whether financial, operational, or otherwise, from the primary government.

While component units are separate legal entities, their function and purpose are commonly tied to the primary government, which often includes them in its financial reports to present a complete and accurate picture of its financial position. This relationship emphasizes the importance of recognizing any dependencies that may impact the financial sustainability of the component unit.