The Purchase of Stock in Another Company Is Considered to Be

question 94

True/False

The purchase of stock in another company is considered to be a financing activity.

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Definitions:

Principal

The original sum of money borrowed in a loan, or the original amount invested, excluding any interest or dividends.

Accounts Receivable

Money owed to a business by its clients for goods or services delivered but for which payment has not yet been received.

Credit

An accounting entry that increases the balance of liabilities and equity accounts, and decreases the balance of assets accounts. It is also the provision of resources (such as money) by one party to another with the expectation of repayment.

Accrued Interest

Interest that has accumulated over a period but has not yet been paid or officially recorded.