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

Why is it generally considered a poor financial decision to simply hide money in a safe place rather than investing it in securities?

Because hidden money does not earn interest or returns and loses value over time due to inflation.

Because hiding money increases its value through compounding interest.

Because hidden money is automatically taxed at a higher rate than invested money.

Because hidden money is insured by the government against all risks.

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Verified step by step guidance

Understand the concept of inflation: Inflation refers to the general increase in prices over time, which reduces the purchasing power of money. This means that money hidden in a safe place loses value over time because it does not grow to keep up with inflation.

Learn about investment returns: Investing money in securities, such as stocks, bonds, or mutual funds, allows it to earn returns through interest, dividends, or capital appreciation. These returns help grow the value of money over time.

Compare hidden money versus invested money: Hidden money does not earn any returns, while invested money benefits from compounding interest or returns. Compounding occurs when earnings are reinvested, generating additional earnings over time.

Understand the role of taxation: Hidden money is not automatically taxed at a higher rate than invested money. However, certain investments may offer tax advantages, such as tax-deferred growth or lower tax rates on capital gains, which can further enhance the value of invested money.

Clarify government insurance: Hidden money is not insured by the government against risks. However, certain investments, like bank deposits, may be insured up to a limit by government programs (e.g., FDIC insurance in the U.S.), providing a level of protection for invested funds.