Question

Complete the following descriptions by selecting the appropriate option. 1. Debt securities reflect an) relation such as with investments in notes and bonds. 2. Equity securities reflect an) relation such as with investments in shares of stock. Short-term investments are securities that (1) management intends to convert to cash within or the whichever is longer, and (2) are readily convertible to . Long-term investments in securities are defined as those securities that are convertible to cash or are to be converted into cash in the short term. < Prev 1 of 3 !!! Next > 90 92 WOŁO A I MacBook Pro De
answer options: cash, creditor, not intended, not readily, one year, operating cycle, owner

Answer 1

1.Debt securities reflect a creditor relation such as investments in notes and bonds.

Explanation : because debt securities amount is payable by the company to the investor and he invests for the earning fixed interest income and not for share in profits. So, debt securities reflect creditor relation.

2. Equity securities reflect an Owner relation such as investments in shares and stock.

Explanation : because Company is not under obligation to pay the amount invested in shares and stock and also amount invested in shares not for fixed interest income but for shares in profits.

3. Short term investments are securities that (1) management intends to convert to cash within one year or the operating cycle, whichever is longer and are (2) readily convertible to cash.

Explanation - short term investments are current assets and current assets are the assets that are convertible to cash within one year or the operating cycle whichever is longer.

4. Long term investments in securities are defined as those securities that are not readily convertible to cash or are not intended to be converted into cash in the short term.

Explanation : long term securities are intended for those projects which have longer duration of time to complete and till completion of such project these securities amount can't be paid back to investors. These securities are not intended to be converted to cash in short time because even the investors invests with long term capital gain and not the short term liquidity availability.