Question

Motivations for intercorporate investments: Coca-Cola Company owns 300 shares of Cisco Systems, and classifies the investment as a current asset, trading securities. The most likely reason Coca-Cola made this investment is to:

1) Generate additional income through dividends and capital appreciation
2) Diversify its investment portfolio
3) Gain strategic advantages or access to new markets
4) Establish a long-term partnership with Cisco Systems

Answer 1

Coca-Cola's investment in Cisco Systems is likely motivated by the potential to generate additional income and capital appreciation, though portfolio diversification could also be a factor. Option 1.

Step-by-step explanation:

The most likely reason Coca-Cola made an investment in Cisco Systems is to (1) generate additional income through dividends and capital appreciation. This strategic move would allow Coca-Cola to potentially enhance its revenues by investing in a different sector. Trading securities such as stocks offer the possibility for income via dividends, as well as the opportunity for the investment to appreciate in value, leading to capital gains when sold. Diversifying their investment portfolio is also a possible motivation, although Coca-Cola would likely pursue investments within its own industry for strategic advantages or to establish long-term partnerships.