BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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They wish to gain control of a competitor.
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They have excess cash.
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They wish to move into a new line of business.
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They are required to by law.
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Detailed explanation-1: -Which of the following is not a primary reason why corporations invest in debt and equity securities? They are required to by law.
Detailed explanation-2: -Securities Offer Diversification Corporations that invest in securities spread their assets around to avoid taking a hit on all of their capital if it’s tied up in one place and something happens to it. Businesses also use securities to look for new money-making opportunities.
Detailed explanation-3: -One significant motivation for investing (in equity securities) is to secure certain operating or financing arrangements with another company.
Detailed explanation-4: -Corporations invest for three primary reasons: (a) They have excess cash. (b) They view investments as a significant revenue source. (c) They have strategic goals such as gaining control of a competitor or moving into a new line of business.