Financial Accounting (12th Edition) (What's New in Accounting)
Financial Accounting (12th Edition) (What's New in Accounting)
9th Edition
ISBN: 9780134726656
Author: Harrison
Publisher: PEARSON
Question
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Chapter E, Problem 1QC
To determine

To Explain: The reason for a company to invest in another company.

Expert Solution & Answer
Check Mark

Answer to Problem 1QC

Option D is the correct answer.

Explanation of Solution

Investment:

It refers to the process of using the currently held excess cash to earn profitable returns in future. The investments can be made in equity securities such as shares or debt securities such as bonds.

The company invests in another company for a short-term basis and long-term basis. They invest on short term basis to earn additional capital in the form of interest and dividends. A company invests in another company for long-term basis in order to gain influence over another company.

Option a, b, and c is all correct statements for a company to invest in another company. Hence, the option D all the above is the correct answer.

Conclusion

Therefore, Option D is the correct answer.

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Financial accounting

Chapter E Solutions

Financial Accounting (12th Edition) (What's New in Accounting)

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