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Match Each of the Definitions That Follow with the Appropriate

Question 121

Matching

Match each of the definitions that follow with the appropriate investment term.

Premises:

Responses:

debt and equity securities purchased and sold to earn short-term profits from changes in the market price

debt securities

preferred and common stock that represent ownership in a company and do not have a fixed maturity date

equity securities

the method of reporting an investment that represents less than 20% of the outstanding stock of another company

investor

when using this, dividends are treated as a reduction of the investment

investee

notes and bonds that pay interest and have a fixed maturity

fair value method

debt investments that a company intends to keep until their maturity date

trading securities

securities not held for trading or to maturity or other strategic reasons

available-for-sale securities

the company investing in another company’s stock

held-to-maturity securities

what occurs when a company purchases 50% or more of another company’s stock

equity method

the company whose stock is purchased by another entity

business combination

Premises:

debt and equity securities purchased and sold to earn short-term profits from changes in the market price

preferred and common stock that represent ownership in a company and do not have a fixed maturity date

the method of reporting an investment that represents less than 20% of the outstanding stock of another company

when using this, dividends are treated as a reduction of the investment

notes and bonds that pay interest and have a fixed maturity

debt investments that a company intends to keep until their maturity date

securities not held for trading or to maturity or other strategic reasons

the company investing in another company’s stock

what occurs when a company purchases 50% or more of another company’s stock

the company whose stock is purchased by another entity

Responses:

debt securities

equity securities

investor

investee

fair value method

trading securities

available-for-sale securities

held-to-maturity securities

equity method

business combination

Correct Answer:

Premises:

Responses:

debt and equity securities purchased and sold to earn short-term profits from changes in the market price

preferred and common stock that represent ownership in a company and do not have a fixed maturity date

the method of reporting an investment that represents less than 20% of the outstanding stock of another company

when using this, dividends are treated as a reduction of the investment

notes and bonds that pay interest and have a fixed maturity

debt investments that a company intends to keep until their maturity date

securities not held for trading or to maturity or other strategic reasons

the company investing in another company’s stock

what occurs when a company purchases 50% or more of another company’s stock

the company whose stock is purchased by another entity