Learning Team A
Global Business Financial Environment
GM Motors uses SEC filings (US Securities and Exchange Commissions). Available-for-sale securities are one type of investment a company can make. Available-for-sale securities are any security not classified as a trading security or held to maturity security. These can either be debt or equity securities, however, the accounting is the same for each. An accountant must properly account and report these securities on the company's financial statements. Accountants revalue available-for-sale securities each year and have to report unrealized gains or losses. These unrealized gains or losses are ...view middle of the document...
If you've made any direct investments in a company that's not publicly traded, gather the paperwork from that transaction. Determine your ownership in each company you've invested in: Look at your number of shares and determine all outstanding shares. In most cases, you'll own less than 20 percent of the company in which you're investing. In this instance, use the "cost method" to report investments: List the fair market value of your holding as "equity investments" on the balance sheet under "long-term assets." If you plan to sell the securities in less than one year, list your holding under "short-term assets." All mutual fund shares should be listed as investments using the rules for the cost method. Report the investment through the "equity method" if you own more than 20 percent of the company and control up to 50 percent of it. In this method, your company's portion of earnings in the investment company flows through to your investment line on the balance sheet; the amount of your investment increases by your share of dividends or profits. Consolidate the target company's balance sheet and income statement into your existing statement if you own more than 50 percent of the investment company.
General Motors would invest in stocks and securities to increase its standing in the global marketplace. There are many factors which could come into play in determining if an organization should invest in stocks of other organizations. One key factor would be the ability of General Motors to invest in companies that can help GM make a profit, the company could decide to make a major investment in a tire manufacturer to help improve the performance of their automobiles. These types of investments would allow GM to save on the purchase of materials which could improve the value of that segment of the company. Investing in securities would also be a viable option because of the amount of capital the GM Company produces, they would likely have lower interest rates which would make paying principle more affordable. GM would likely be able to invest in a variety of different organizations improving its financial wellbeing improving the profitability of the company.
The risk versus rewards of equity and debt securities with respect to the General Motors Company would be determining how much would be revealed in the organizations corporate balance sheet. General Motors is very open about its investing procedures but some elements may be hidden to protect its investors in the future. The equity of the organization would be determined by the amount of assets verses the amount of liabilities, as long as General Motors decides to use its capital earned from sales to pay its liabilities their equity would be in good standing. The decision to purchase debt securities would come from the organization determining if the return on investment would be significant enough to do so, debt securities are less risky that other forms of investment but more...