Companies invest in other companies to gain influence

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Reference no: EM131329458

You mentioned that companies invest in other companies to gain influence over the decisions of the company. Companies have different motivations for investing in securities issued by other companies. One motivation is to earn a high rate of return. For example, companies like Coca-Cola and PepsiCo can receive interest revenue from a debt investment or dividend revenue from an equity investment. In addition, they can realize capital gains on both types of securities. Another motivation for investing (in equity securities) is to secure certain operating or financing arrangements with another company. As in the opening story, Coca-Cola and PepsiCo are able to exercise some control over bottler companies based on its significant (but not controlling) equity investments (Kieso, Weygandt, & Warfield, 2013). How do you think the financial aspect influence the ownership decisions made?

Reference no: EM131329458

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