MGT120H5 Chapter Notes - Chapter 5: General Ledger, Book Value, Accounts Receivable
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MGT120H5 Full Course Notes
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Chapter 5 - short term investments and receivables. *short term investments are the next most liquid current assets after cash. These are also called marketable securities or temporary investments. They"re investments that a company plans to hold for one year or less. These investments allow the company to invest excess cash for a short period of time and earn a return until the cash is needed. The account for this is placed right after cash, before the receivables. The purpose of owning a financial asset held for trading investment is to hold it for a short time and then sell it for more than its cost. Trading investments can be shares or bonds in another company. Let"s say loblaws buys bonds from another company, transcanada, for ,000, they will then receive dividends. If the company"s fair value (market price) of the shares increases, loblaws will have a gain; and a loss if it decreases.