Question

Describe why corporations invest and what is the impact on the financial statements of a corporation, in particular, the Balance Sheet and the Income Statement.

Answer 1

Coprorates often invest in the securities of other corporations because thet are short term investment with a high level of liquidity. Stocks and other corporates equity and debt instrument may be easily sold through a stovk exchange with the help of a broker , typically as the same day as the descision of sell is made.

If corporates invest then their assets are increases ( current or long term ) as the case may be (i.e. based on the investment whether it is short term or long term).

Also if corporates buys securities bearing interest then also interest incomes increases in the income statement of the corporations during the year.

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