MGT220H5 Chapter Notes - Chapter 9: Commercial Paper, Accrued Interest, Financial Statement
Document Summary
I(cid:374)vest(cid:373)e(cid:374)ts; cost model; fair value; losses; sig(cid:374)ifica(cid:374)t i(cid:374)flue(cid:374)ce; co(cid:374)trol; co(cid:374)solidatio(cid:374) 2 reasons companies hold investments: to have the capital appreciate, or, to earn dividends and/or income. 2 main types of investments: debt instruments. Companies that invest in debt instruments of another entity are creditors of the issuing company. Debt instruments include debt securities, whose prices are normally quoted in an active market, such as investments in government & corporate bonds, convertible debt, and commercial paper. Debt instruments generally have contractual requirements regarding repayment of principal & payment of interest. When a company invests in debt instruments, it usually pays cash up front and receives the rights to receive interest & the return of principal later: equity instruments. They also include rights to acquire or dispose of ownership interests at an agreed-upon or determinable price, such as warrants, rights, and call/put options.
