investment
An investment is the purchase of a financial instrument (such as stocks , bonds and bank products) or an asset with the purpose of producing income for the purchaser through profit or generating more business in the future.
Sometimes a company decides to invest in another company with the purpose of influencing that company’s policies and activities. Common types of company investments are as follows:
- Passive investments in debt and equity securities : Passive investments are made to earn a return on funds that may be needed for future short- term or long-term purposes.
- Investments in stock for significant influence: Significant influence refers to the ability to have a significant impact on another company's operating, investing, and financing policies. If the investing business holds 20% to 50% of the other company's outstanding voting shares , significant influence is assumed.
- Investments in stock for control: Control refers to the capacity to influence a company's running and financial policies through voting stock ownership. Control is presumed when the investing business holds more than 50% of the other company's outstanding voting shares.
[Last reviewed in March of 2022 by the Wex Definitions Team ]
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