Which of the Following Could Be Considered an Example of Forced

question 18

Multiple Choice

Which of the following could be considered an example of forced reinvestment if the blockage of funds was expected to be temporary?

• A) vertical reinvestment by an automobile manufacturer to buy parts suppliers and showrooms
• B) a lumber cutting company subsequently builds a paper mill with blocked funds
• C) purchase of local money market instruments and short-term loans
• D) all of the above

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Definitions:

Executory Costs

Executory costs are the ongoing operating expenses in a lease agreement, such as insurance, maintenance, and property taxes, usually borne by the lessee.

Capital Lease

A lease treated as an acquisition of an asset and the incurrence of an obligation on the lessee's balance sheet, indicating a purchase and financing arrangement.

Lease Liability

An obligation representing the present value of future lease payments under a non-cancellable lease.

Operating Lease

A lease agreement that allows for the use of an asset but does not transfer ownership of the asset to the lessee, often with shorter terms.