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After completing this chapter you should be able to: Distinguish between debt and equity securities and between short-term and long-term investments, describe how to report equity securities with controlling influence, compute and analyze the components of return on total assets,. | Investments and International Operations Chapter 15 Chapter 15: Investments and International Operations Basics of Investments Companies transfer excess cash into investments to produce higher income. Some companies are set up to produce income from investments. Companies make investments for strategic reasons. Motivation for Investments C1 Companies make investments for at least three reasons. First, companies transfer excess cash into investments to produce higher income. Second, some entities, such as mutual funds and pension funds, are set up to produce income from investments. Third, companies make investments for strategic reasons. Examples are investments in competitors, suppliers, and even customers. Investments of Selected Companies Short-Term (S-T) and Long-Term (L-T) Investments as a Percent of Total Assets C1 This chart shows the relative proportion of short-term and long-term investments for four different companies. Notice the difference between the investments as a percent of total assets between Microsoft and Coca-Cola. Also notice the different emphasis on short-term vs. long-term investments for Microsoft and Coca-Cola. Short-Term Investments C1 Short-term investments are securities that: Management intends to convert to cash within one year or the operating cycle, whichever is longer. Are readily convertible to cash. Short-term investments do not include cash equivalents. Cash equivalents are investments that are both readily converted to known amounts of cash and mature within three months. Cash equivalents are investments that are both readily converted to known amounts of cash and mature within three months. Many investments, however, mature between 3 and 12 months. These investments are short-term investments, also called temporary investments and marketable securities. Specifically, short-term investments are securities that (1) management intends to convert to cash within one year or the operating cycle, whichever is longer, and (2) are . | Investments and International Operations Chapter 15 Chapter 15: Investments and International Operations Basics of Investments Companies transfer excess cash into investments to produce higher income. Some companies are set up to produce income from investments. Companies make investments for strategic reasons. Motivation for Investments C1 Companies make investments for at least three reasons. First, companies transfer excess cash into investments to produce higher income. Second, some entities, such as mutual funds and pension funds, are set up to produce income from investments. Third, companies make investments for strategic reasons. Examples are investments in competitors, suppliers, and even customers. Investments of Selected Companies Short-Term (S-T) and Long-Term (L-T) Investments as a Percent of Total Assets C1 This chart shows the relative proportion of short-term and long-term investments for four different companies. Notice the difference between the investments as a .
