Debt securities: Debt securities are financing instrument which represents the loan taken from the creditor and usually these securities pay defined interest rate on the amount borrowed. The several types of debt instruments are bonds, certificate of deposits, preferred stock , corporate bonds etc. Equity securities: Equity securities are financing instrument issued by a company representing the share in the capital financed by the investor. These securities gives right of ownership in the share capital of the company. Equity share holders are paid dividend and share the retained earnings as well. Short-term investments: Short-term investments are investments which are hold for a period of one year or less and which are easily convertible into cash. Long-term investments: Long-term investments are investments which are to be hold for a period of more than one year which are not easily convertible into cash in short term. To choose: The reason why business purchases securities.

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Chapter A2, Problem 3MCQ

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Concept introduction:

Debt securities:

Debt securities are financing instrument which represents the loan taken from the creditor and usually these securities pay defined interest rate on the amount borrowed. The several types of debt instruments are bonds, certificate of deposits, preferred stock, corporate bonds etc.

Equity securities:

Equity securities are financing instrument issued by a company representing the share in the capital financed by the investor. These securities gives right of ownership in the share capital of the company. Equity share holders are paid dividend and share the retained earnings as well.

Short-term investments:

Short-term investments are investments which are hold for a period of one year or less and which are easily convertible into cash.

Long-term investments:

Long-term investments are investments which are to be hold for a period of more than one year which are not easily convertible into cash in short term.

To choose:

The reason why business purchases securities.

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