To Avoid the Stock Versus Flow Issue in Production, Some

question 129

Multiple Choice

To avoid the stock versus flow issue in production, some economists discuss capital usage in terms of rented capital. For example, your firm may not directly own some of the capital inputs to your production operation, and these capital inputs are employed on an hourly or daily basis. Which of the following inputs is a good example of a capital input that acts like a flow?

• A) Land and buildings that are owned by the firm
• B) A long-term licensing agreements that allow you to use a patented idea owned by another firm
• C) A forklift that is rented on an hourly basis
• D) all of the above

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Definitions:

Credit

An accounting entry that increases liabilities or equity or decreases an asset or expense.

Purchase Invoice

A purchase invoice is a document issued by a seller to a buyer that outlines the sale transaction, including the types of products or services sold, quantities, prices, and payment terms.

Refund Liability

A liability recorded on the balance sheet for expected refunds to customers for returned or unsatisfactory products or services.