Multiple Choice
Why might some investors view a decrease in a company's share price as a positive opportunity?
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7. Receivables and Investments
Introduction to Investments in Securities
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In the context of investments in securities, what do investors typically call an investment in vacant land?
A
A held-to-maturity investment
B
A marketable security
C
A non-productive asset
D
A trading security
Verified step by step guidance1
Understand the context of the question: Investments in securities refer to financial instruments that investors purchase with the expectation of earning returns, such as stocks, bonds, or other marketable assets.
Recognize the nature of vacant land: Vacant land does not generate income or cash flows directly, unlike stocks or bonds. It is considered a physical asset rather than a financial instrument.
Define the term 'non-productive asset': A non-productive asset is an asset that does not produce income or cash flows on its own. Vacant land falls into this category because it does not generate revenue unless developed or sold.
Differentiate between the other options: Held-to-maturity investments are debt securities that an investor intends to hold until maturity. Marketable securities are liquid financial instruments that can be quickly converted to cash. Trading securities are bought and sold frequently for short-term profit. None of these terms accurately describe vacant land.
Conclude that vacant land is classified as a non-productive asset because it does not generate income or cash flows directly and does not fit the definitions of the other options provided.
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