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 pieces of information is essential to calculate the rate of return on an investment in securities?

The initial investment amount and the ending value of the investment

The number of shares outstanding and the company's net income

The company's dividend policy and its board of directors

The par value of the security and the market interest rate

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Verified step by step guidance

Understand the concept of 'rate of return': The rate of return measures the gain or loss on an investment over a specific period, expressed as a percentage of the initial investment amount.

Identify the essential components for calculating the rate of return: To compute the rate of return, you need the initial investment amount (the amount originally invested) and the ending value of the investment (the value at the end of the investment period).

Recognize why other options are not relevant: The number of shares outstanding and the company's net income, dividend policy, board of directors, par value, and market interest rate do not directly contribute to the calculation of the rate of return. These factors may influence other financial metrics but are not essential for this calculation.

Recall the formula for rate of return: The formula is \( \text{Rate of Return} = \frac{\text{Ending Value} - \text{Initial Investment}}{\text{Initial Investment}} \times 100 \). This formula highlights the need for the initial investment amount and the ending value.

Apply the formula conceptually: To calculate the rate of return, subtract the initial investment amount from the ending value to find the gain or loss, divide this by the initial investment amount, and multiply by 100 to express it as a percentage.