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

When a person invests income, he or she:

pays off all existing liabilities without considering future returns.

only deposits money into a checking account for daily expenses.

allocates funds to assets such as stocks or bonds with the expectation of generating a return.

spends all available income on immediate consumption.

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Verified step by step guidance

Understand the concept of investment: Investment involves allocating funds to assets such as stocks, bonds, real estate, or other financial instruments with the expectation of generating a return over time.

Differentiate between investment and other financial actions: Investment is distinct from paying off liabilities, depositing money into a checking account, or spending income on immediate consumption. These actions do not aim to generate future returns.

Identify the key characteristic of investment: The primary goal of investment is to grow wealth by earning returns, which can come in the form of interest, dividends, or capital appreciation.

Recognize the types of assets involved in investment: Common investment assets include stocks, bonds, mutual funds, and real estate. These assets are chosen based on their potential to generate returns and align with the investor's risk tolerance and financial goals.

Apply the concept to the problem: Based on the explanation, the correct answer is the option that describes allocating funds to assets such as stocks or bonds with the expectation of generating a return.