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 statements about the importance of the financial market is true?

Financial markets are primarily responsible for setting government fiscal policy.

Financial markets eliminate all risks associated with investing in securities.

Financial markets facilitate the transfer of funds from savers to borrowers, promoting economic growth.

Financial markets only benefit large corporations and have little impact on individual investors.

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Verified step by step guidance

Understand the role of financial markets: Financial markets are platforms where buyers and sellers trade financial instruments such as stocks, bonds, and derivatives. Their primary function is to facilitate the transfer of funds from savers (individuals or entities with surplus funds) to borrowers (individuals or entities needing funds). This process promotes economic growth by enabling investments in businesses, infrastructure, and other productive activities.

Evaluate the first statement: 'Financial markets are primarily responsible for setting government fiscal policy.' Fiscal policy refers to government decisions on taxation and spending, which are determined by government entities, not financial markets. Therefore, this statement is incorrect.

Evaluate the second statement: 'Financial markets eliminate all risks associated with investing in securities.' Financial markets do not eliminate risks; they provide mechanisms to manage and trade risks. Investing in securities always carries some level of risk, such as market risk, credit risk, or liquidity risk. Hence, this statement is incorrect.

Evaluate the third statement: 'Financial markets facilitate the transfer of funds from savers to borrowers, promoting economic growth.' This is a correct and fundamental function of financial markets. By channeling funds efficiently, they support investments and economic development.

Evaluate the fourth statement: 'Financial markets only benefit large corporations and have little impact on individual investors.' Financial markets benefit both large corporations and individual investors. They provide opportunities for individuals to invest, save, and grow their wealth, as well as for corporations to raise capital. Therefore, this statement is incorrect.