Multiple Choice
If you purchase a bond for $1,000 that pays annual interest of $50 and will be redeemed at par ($1,000) after one year, what is the rate of return you would earn?
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7. Receivables and Investments
Introduction to Investments in Securities
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following is an example of a cash inflow from an investing activity?
A
Proceeds from the sale of equipment
B
Cash received from issuing common stock
C
Payment of dividends to shareholders
D
Cash collected from customers
Verified step by step guidance1
Step 1: Understand the concept of cash flows from investing activities. Investing activities involve transactions related to the acquisition or disposal of long-term assets, such as property, plant, equipment, or investments.
Step 2: Analyze the options provided in the question. Determine which option represents a cash inflow related to the sale or disposal of long-term assets.
Step 3: Evaluate 'Proceeds from the sale of equipment.' This represents cash received from selling a long-term asset, which is classified as a cash inflow from investing activities.
Step 4: Evaluate 'Cash received from issuing common stock.' This is a financing activity, as it involves raising capital from shareholders, not an investing activity.
Step 5: Evaluate 'Payment of dividends to shareholders' and 'Cash collected from customers.' The former is a financing activity, while the latter is an operating activity, neither of which are investing activities.
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