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 of the following best describes the two main reasons that firms purchase equity shares in other firms?

To reduce tax liabilities and to increase inventory turnover

To earn investment income and to exert influence or control over the investee

To increase cash reserves and to avoid financial reporting

To comply with government regulations and to decrease liabilities

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Verified step by step guidance

Understand the context of the question: Firms purchase equity shares in other firms for strategic and financial reasons. This involves analyzing the motivations behind such investments.

Clarify the concept of 'investment income': Investment income refers to the earnings generated from investments, such as dividends or capital gains, which are a primary reason firms invest in equity shares.

Explain the concept of 'influence or control': When a firm purchases a significant portion of another firm's equity, it may gain the ability to influence decisions or exert control over the investee, which can be strategic for business operations.

Evaluate the incorrect options: For example, reducing tax liabilities, increasing inventory turnover, or avoiding financial reporting are not primary reasons for purchasing equity shares. These options do not align with the strategic and financial goals of firms.

Conclude by identifying the correct answer: The two main reasons firms purchase equity shares in other firms are to earn investment income and to exert influence or control over the investee. This aligns with the strategic and financial objectives of such investments.