To Explain: The reason for a company to invest in another company.
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.
Therefore, Option D is the correct answer.
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Chapter E Solutions
Financial Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (12th Edition)
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