Asked by Alicia Gregory on May 12, 2024
Verified
Short-term investments are securities held by a company that are
A) readily marketable.
B) intended to be converted into cash within the next year.
C) readily marketable and intended to be converted into cash within the next year or operating cycle whichever is longer.
D) readily marketable and intended to be held until maturity.
Readily Marketable
Items or securities that are readily marketable can be quickly sold in the market without significantly affecting their price.
Operating Cycle
The duration of time it takes for a company to purchase inventory, sell products, and receive cash from sales, representing the full cycle of a business's operations.
Short-Term Investments
Investments typically expected to be converted into cash within one year, such as stocks or bonds.
- Identify and classify different types of investments a company can hold.
Verified Answer
MS
Madhulika SanyalMay 16, 2024
Final Answer :
C
Explanation :
Short-term investments are securities that a company plans to hold for a short period of time and that are readily marketable. They are also intended to be converted into cash within the next year or operating cycle, whichever is longer. This classification allows investors and analysts to better understand a company's liquidity and operating cycle. Choice A is not specific enough as not all marketable securities are short-term investments. Choice B is almost correct, but fails to include the operating cycle as a possible timeframe. Choice D is incorrect because short-term investments are not intended to be held until maturity.
Learning Objectives
- Identify and classify different types of investments a company can hold.