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

In the context of investments in securities, when capital is allocated to purchase real capital (such as long-term plant and equipment), this process is best described as:

Indirect investment

Derivative investment

Speculative investment

Direct investment

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Verified step by step guidance

Understand the concept of 'Direct Investment': Direct investment refers to the allocation of capital to purchase tangible assets such as long-term plant, equipment, or other physical assets. This is distinct from investments in financial instruments or speculative ventures.

Differentiate between the types of investments: Indirect investment involves investing in financial instruments like stocks or bonds that represent ownership or claims on assets. Derivative investment refers to financial contracts whose value is derived from an underlying asset. Speculative investment involves high-risk investments aimed at achieving significant returns.

Analyze the context of the problem: The question specifies the allocation of capital to purchase real capital, such as long-term plant and equipment. This aligns with the definition of direct investment, as it involves tangible, physical assets.

Eliminate incorrect options: Indirect investment, derivative investment, and speculative investment do not involve the direct purchase of physical assets like plant and equipment. These terms refer to other forms of financial or high-risk investments.

Conclude that the correct answer is 'Direct Investment': Based on the definitions and the context provided, the process described in the problem is best categorized as direct investment.