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 how an investor makes money from an equity investment?

By receiving guaranteed principal repayment at maturity

By collecting rental income from the company's physical assets

By earning fixed interest payments regardless of company performance

By receiving dividends and realizing capital gains when the stock price increases

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Verified step by step guidance

Understand the nature of equity investments: Equity investments represent ownership in a company, typically through purchasing shares of stock. Investors do not receive guaranteed payments or fixed returns, as these are characteristics of debt investments like bonds.

Clarify the concept of dividends: Dividends are payments made by a company to its shareholders, usually derived from the company's profits. These payments are not guaranteed and depend on the company's financial performance and dividend policy.

Explain capital gains: Capital gains occur when the value of the stock increases above the purchase price. Investors can realize these gains by selling the stock at a higher price than they originally paid.

Differentiate equity investments from other types of investments: Unlike bonds, equity investments do not provide fixed interest payments or guaranteed principal repayment. Additionally, equity investors do not collect rental income from the company's physical assets, as this is unrelated to stock ownership.

Summarize how investors make money from equity investments: Investors earn money through dividends distributed by the company and by realizing capital gains when the stock price appreciates. These earnings depend on the company's performance and market conditions.