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Purchase of marketable securities will result in _________.
- a)Decrease in cash and cash equivalents
- b)Increase in Investing activities.
- c)Increase in cash and cash equivalents
- d)No effect on cash and cash equivalents
Correct answer is option 'D'. Can you explain this answer?
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Verified Answer
Purchase of marketable securities will result in _________.a)Decrease ...
Marketable securities are liquid financial instruments that can be quickly converted into cash at a reasonable price. The liquidity of marketable securities comes from the fact that the maturities tend to be less than one year, and that the rates at which they can be bought or sold have little effect on prices.
Most Upvoted Answer
Purchase of marketable securities will result in _________.a)Decrease ...
Effect of Purchase of Marketable Securities on Cash and Cash Equivalents
No Effect on Cash and Cash Equivalents
When a company purchases marketable securities, it does not directly impact cash and cash equivalents. This is because marketable securities are bought using cash or cash equivalents, which means that there is no change in the overall cash balance of the company. However, there may be some indirect effects on cash and cash equivalents due to the purchase of marketable securities.
Indirect Effects on Cash and Cash Equivalents
The indirect effects on cash and cash equivalents due to the purchase of marketable securities may include the following:
1. Interest Income: The marketable securities may generate interest income, which will increase the cash balance of the company.
2. Sale of Marketable Securities: If the company sells the marketable securities in the future, it will receive cash, which will increase the cash balance of the company.
3. Market Value: The market value of the marketable securities may increase or decrease, which will affect the overall value of the company's investment portfolio. This may indirectly impact the cash and cash equivalents of the company.
Conclusion
In conclusion, the purchase of marketable securities does not directly impact the cash and cash equivalents of the company. However, there may be some indirect effects on cash and cash equivalents due to the interest income, sale of marketable securities, and market value of the investment portfolio.
No Effect on Cash and Cash Equivalents
When a company purchases marketable securities, it does not directly impact cash and cash equivalents. This is because marketable securities are bought using cash or cash equivalents, which means that there is no change in the overall cash balance of the company. However, there may be some indirect effects on cash and cash equivalents due to the purchase of marketable securities.
Indirect Effects on Cash and Cash Equivalents
The indirect effects on cash and cash equivalents due to the purchase of marketable securities may include the following:
1. Interest Income: The marketable securities may generate interest income, which will increase the cash balance of the company.
2. Sale of Marketable Securities: If the company sells the marketable securities in the future, it will receive cash, which will increase the cash balance of the company.
3. Market Value: The market value of the marketable securities may increase or decrease, which will affect the overall value of the company's investment portfolio. This may indirectly impact the cash and cash equivalents of the company.
Conclusion
In conclusion, the purchase of marketable securities does not directly impact the cash and cash equivalents of the company. However, there may be some indirect effects on cash and cash equivalents due to the interest income, sale of marketable securities, and market value of the investment portfolio.
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Community Answer
Purchase of marketable securities will result in _________.a)Decrease ...
Ya correct answer is d because one component of cash and cash equivalents that is cash balance is converted into another component of cash and cash equivalents that is marketable securities.
i hope that i have made it very clear but still if you have any confusion then please ask....i will try my best..
Upvote only if it is clear to you...
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Purchase of marketable securities will result in _________.a)Decrease in cash and cash equivalentsb)Increase in Investing activities.c)Increase in cash and cash equivalentsd)No effect on cash and cash equivalentsCorrect answer is option 'D'. Can you explain this answer?
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