Chapter 15 - Investments and International Operations

Question 1

short term investment

Answer 1

• securities that
  (1) management intends to convert to cash within one year of the operating cycle, whichever is longer
  (2) are readily convertible to cash
• are reported under current assets and serve a purpose similar to cash equivalents

Question 2

long term investments

Answer 2

• securities that are not readily convertible to cash or are not intended to be converted into cash in the short term
• can also include funds earmarked for a special purpose, such as bond sinking funds and investments in land or other assets not used in the company’s operations