Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which best describes the primary purpose of making an investment in securities?

To increase the number of liabilities on the balance sheet

To avoid paying taxes on income

To reduce the company's equity

To earn a return on invested funds over time

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Verified step by step guidance

Understand the concept of securities: Securities are financial instruments that represent ownership (like stocks) or a creditor relationship (like bonds) with an entity. Companies invest in securities to generate returns on their surplus funds.

Recognize the primary purpose of investing in securities: The goal is to earn a return on invested funds over time, which can come in the form of interest, dividends, or capital gains.

Eliminate incorrect options: Analyze why the other choices are not valid. Increasing liabilities, avoiding taxes, or reducing equity are not the primary purposes of investing in securities.

Relate the purpose to financial accounting: Investments in securities are recorded as assets on the balance sheet, reflecting the company's intention to grow its wealth through returns.

Conclude with the correct purpose: The primary purpose of making an investment in securities is to earn a return on invested funds over time, aligning with the company's financial goals and strategies.