Corporate finance Essay Example for Free

Corporate finance EssayThere are three main reasons companies corrupt enthronements in debt or stock securities. The first reason is if corporations have extra cash that they dont need for immediate purchase of operating assets.The second reason is Companies purchase investments to experience earnings from investment income. The third reason companies purchase investments is for strategic reasons. A company can exercise some influence over a customer by owning a significant, but not controlling, interest in that company. Or, a company may purchase a non controlling interest in another company in a related industry in which it wishes to establish a presence. (Weygandt, Kimmel, Kieso, 2010).Sometimes corporations will have excess cash for investment reasomns. It may invest in things, incase in the future the economy falls then it has money to fall back on when money is gone, or low. 3. Low-risk, high-liquidity, short-term securities such as government-issued securities are bes t when investing for short periods of time. 4. Debt securities, from banks and other financial institutions and stock securities from mutual funds and pension funds generate earnings when investing. 5.6. Stocks of companies in a related industry or in an unrelated industry that the company wishes to enterQ E12-2 Foren Corporation had the following transactions pertaining to debt investments. Jan. 1 Purchased 50 8%, $1,000 Choate Co. bonds for $50,000cash plus brokerage fees of $900. Interest is payable semiannually on July 1 and January 1. July 1 Received semiannual interest on Choate Co. bonds. July 1 Sold 30 Choate Co. bonds for $34,000 less $500 brokerage fees. Instructions(a) Journalize the transactions.(b) Prepare the adjusting entry for the accrual of interest at December 31.A. Jan. 1Debt investments $50,900 funds $50,900July 1Cash $2000Interest rev.$2000July 1Cash $33,500Debt Investment $33,540Gain on sale $2,960Dec. 31Interest receivable $2000Interest revenue $2000References Weygandt, J. J., Kimmel, P. D., Kieso, D. E. (2010). financial accounting (7th ed.). Hoboken, NJ John Wiley Sons.