Chapter 6, Problem 1Q

1. What is the difference between the functions of long-term operational assets and investments?

To determine

Explain the difference between the functions of long-term operational assets and investments.

Explanation of Solution

Long-term operational assets:

Long-term operational assets refer to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

Investment:

The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Difference between functions of Long-term operational assets and Investments:

Long-term operational assets are the assets which are used by the company in order to generate revenue in the ordinary course of business. Whereas, investments are held by the company in order to earn interest and dividends from them and for appreciation in the price of the investments.