Question

E16.1 (LO 1) Mr. Taliaferro is studying for an accounting test and has developed the following questions about investments.

1. What are three reasons why companies purchase investments in debt or stock securities?

2. Why would a corporation have excess cash that it does not need for operations?

3. What is the typical investment when investing cash for short periods of time?

4. What are the typical investments when investing cash to generate earnings?

5. Why would a company invest in securities that provide no current cash flows?

6. What is the typical stock investment when investing cash for strategic reasons?

   E16.1 (LO 1) Mr. Taliaferro is studying for an accounting test and has developed the following questions about investments.

7. What are three reasons why companies purchase investments in debt or stock securities?

8. Why would a corporation have excess cash that it does not need for operations?

9. What is the typical investment when investing cash for short periods of time?

10. What are the typical investments when investing cash to generate earnings?

11. Why would a company invest in securities that provide no current cash flows?

12. What is the typical stock investment when investing cash for strategic reasons?

Answer 1

E16.1)

1. The companies purchases investments in debt or stock securities for:

a: to investment idle cash

b: to have inorganic incomes

c: for strategic acquisitions.

2. The corporation have excess cash that is does not need for operations

for some emergency needs or to repay upcoming repayments of loan.

3. The typical investment for short term period are quick liquidating

investments with creditability which could be easily is disposed-off.

4. The typical investments to generate earnings are the high yielding securities.

5. A company invests in securities or stock which not providing any

current cash flows to have future high growth benefits

or have acquisitions or strategic planning.

6. The typical stock investment for strategic reasons are the acquisitions

and takeover of the companies with bright future.