When Net Capital Spending Is a Negative Value, the Firm

question 175

Multiple Choice

When net capital spending is a negative value, the firm has:

• A) Depreciation expense which exceeds the cost of new assets acquired.
• B) Acquired more fixed assets than it has current assets.
• C) Sold more fixed assets than it acquired during a stated period of time.
• D) Reduced its total assets during the course of the year.
• E) Reduced its investment in inventory.

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Definitions:

Liability

The financial liabilities or obligations that a company legally incurs in the course of conducting its business.

Savings Account

A deposit account held at a financial institution that provides principal security and a modest interest rate.

Semiannual Payments

Payments made twice a year, often used in the context of bond interest payments or certain types of loans.

Compounded Semiannually

Interest calculation method where interest is added to the principal sum of a deposit or loan twice a year, resulting in interest earning interest.