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Discuss the reasons why corporations invest in securities.

1) Discuss the reasons why corporations invest in securities. Discuss how the market would be affected if they stopped this practice?

2)Compare and contrast the valuation guidelines for investment at a balance sheet date.

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1) Discuss the reasons why corporations invest in securities. Discuss how the market would be affected if they stopped this practice?

-- Most corporations invest in securities as a means of generating non-operating income. Investing in securities is not a core business activity, and is not considered operating income. It is a way for the business to increase their cash, that is not derived from basic operations. Many corporations purchase short-term investments, which allows the corporation to realize gains (or potential losses). The gain or loss from an investment is considered unrealized until the time that the corporation sells the investment, at which time the gain or loss becomes realized. The company then accounts for the appropriate gain or loss on their financial statements. On special occasion, a company may purchase investments as part of their core business activities, but it ...

Solution Summary

Discuss the reasons why corporations invest in securities. Discuss how the market would be affected if they stopped this practice?

2)Compare and contrast the valuation guidelines for investment at a balance sheet date.

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