Firms may make long-term investments in the equity instruments of other entities because:

Question

Quizplus · Accepted Answer

All of the given reasons may motivate a firm to make a long-term investment in the equity instruments of another entity. The investment may form the basis for a possible takeover bid, holding a diversified portfolio can reduce risk, the investment may yield a return in the form of capital gains and dividends, and having a significant holding may allow the investor to have a representative on the board of directors and influence decisions.

Firms May Make Long-Term Investments in the Equity Instruments of Other