ACC557 Investment powerpoint GOOD INFO

ACC557 Investment powerpoint GOOD INFO - Chapter 12...

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Slide 12-1 Chapter 12 Investments Investments Judith Paquette Judith Paquette Financial Accounting, Seventh Edition
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Slide 12-2 1. Discuss why corporations invest in  debt  and  stock  securities. 2. Explain the accounting for  debt  investments. 3. Explain the accounting for  stock  investments. 5. Indicate how  debt  and  stock  investments are reported in financial  statements—valuing investments 6. Distinguish between short-term and long-term investments. Study Objectives Study Objectives Study Objectives Study Objectives Note: Learning objective #4 is not included.
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Slide 12-3 Corporations generally invest in debt or stock securities for one of three  reasons. Why Corporations Invest Why Corporations Invest Why Corporations Invest Why Corporations Invest 1. Corporation may  have excess cash . 2. To generate  earnings from investment income . 3. For  strategic reasons . Illustration 12-1 Temporary  investments and the  operating cycle
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Slide 12-4 They have Excess Cash $$$$$$$$$$ They have Excess Cash $$$$$$$$$$ They have Excess Cash $$$$$$$$$$ They have Excess Cash $$$$$$$$$$ If you have excess cash, it should be working for you!  (working =  earning interest $$$$$$$$) But, it needs to be readily available when you need it (a “rainy day”  fund) Hence:  invest in low risk funds that can be liquidated quickly
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Slide 12-5 They want to generate earnings from They want to generate earnings from investment income investment income They want to generate earnings from They want to generate earnings from investment income investment income Maybe liquidity isn’t an issue….they want to benefit from dividends and stock appreciation . So they invest in mutual funds and stocks.
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Slide 12-6 For Strategic Reasons—buying a For Strategic Reasons—buying a related related company company For Strategic Reasons—buying a For Strategic Reasons—buying a related related company company Buying a large amount of stock in a company gives the company a certain amount of stock votes…even without a controlling interest, it gives the company an influence. Which company? -a related industry – e.g., Taco Bell buys stock in Chipotle, its competitor… WHY invest in your competitor ?
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Slide 12-7 For Strategic Reasons –to For Strategic Reasons –to influence influence For Strategic Reasons –to For Strategic Reasons –to influence influence To expand its influence in its own industry. Which company? -a related industry – e.g., Taco Bell buys stock in Chipotle, its competitor… WHY invest in your competitor ?
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12-8 For Strategic Reasons—buying an For Strategic Reasons—buying an unrelated unrelated company company For Strategic Reasons—buying an For Strategic Reasons—buying an unrelated unrelated company company It still gives you some influence, but also something else.
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This note was uploaded on 01/14/2012 for the course ACC 557 taught by Professor Makkawi during the Fall '10 term at Strayer.

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ACC557 Investment powerpoint GOOD INFO - Chapter 12...

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