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

According to financial theory, approximately how many different stocks from various categories are generally needed to create a well-diversified investment portfolio?

20-25 stocks

100 or more stocks

5-10 stocks

50-60 stocks

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Verified step by step guidance

Understand the concept of diversification: Diversification is a risk management strategy that involves spreading investments across various financial assets, industries, and other categories to reduce exposure to any single asset or risk.

Learn why diversification is important: A well-diversified portfolio minimizes the impact of poor performance from any single stock or sector, thereby reducing overall portfolio risk.

Explore the general guideline for diversification: Financial theory suggests that holding approximately 20-25 stocks from various categories is typically sufficient to achieve a well-diversified portfolio. This number balances the benefits of diversification with the costs of managing a larger portfolio.

Consider the categories of stocks: To diversify effectively, stocks should be selected from different industries, sectors, and geographic regions to ensure exposure to a variety of market conditions.

Review the options provided: Compare the suggested number of stocks (20-25) with the other options (100 or more, 5-10, 50-60) to identify the correct range for a well-diversified portfolio based on financial theory.