Asked by Ashley Eggleston on May 21, 2024
Verified
Which of the following reasons best explains why a company that experiences seasonal fluctuations in sales may purchase investments in debt or stock securities?
A) The company may have excess cash.
B) The company may generate a significant portion of its earnings from investment income.
C) The company may invest for the strategic reason of establishing a presence in a related industry.
D) The company may invest for speculative reasons to increase the value in pension funds.
Seasonal Fluctuations
Variations in business activity, sales, or performance that occur regularly at certain times of the year due to the season.
Debt Securities
Financial tools that signify an investor lending money to a borrower, commonly consisting of bonds, notes, and bills.
Speculative Reasons
Motivations based on speculation where actions are taken with the expectation of future financial gains or losses.
- Understand the rationale behind companies' investment decisions, including for excess cash management or strategic reasons.
Verified Answer
Learning Objectives
- Understand the rationale behind companies' investment decisions, including for excess cash management or strategic reasons.
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