Which of the following is the best description of investments in trading securities?
A)Investments in bonds that management intends to hold to maturity.
B)Investments in stocks or bonds that are held primarily for the purpose of selling them in the near future.
C)Investments in more than fifty percent of the voting stock of another company.
D)Investments that provide the investor significant influence over the investee, but not control over the investee.

Question

Quizplus · Accepted Answer

Investments in trading securities are held primarily for the purpose of selling them in the near future. They are typically stocks or bonds that the investor expects to sell in a short period of time in order to make a profit on the price difference. This is different from investments in held-to-maturity securities (A), which management intends to hold until they mature and receive the full principal amount, and from investments in equity securities that provide significant influence but not control (D). Investments in more than 50% of voting stock (C) would be classified as investments in subsidiaries or affiliates, not trading securities.

Which of the Following Is the Best Description of Investments